1: Product Maturity 2: Product Life Cycle

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1.0 QUESTION A: Typically, the maturity phase of an industry is reached when the market is saturated with various options of the basic product and all competitors are present in terms of an alternative product. This saturation of the market means that, although it can be the most profitable period for a company as it has achieved its market share goal (William D, 1997), it effects the opportunities for, and ways in which, competitive advantage can be gained. Grant (1995) gives four main characteristics of this change, summarised as follows: • Less scope for differentiation advantage. • Diffusion of process technology resulting in reduced cost advantages. • A mature industry infrastructure and distribution line makes it ‘easier to attach established firms that occupy particular strategic niches’. • The impact of exchange rate movements on cost advantage and the ‘emergence of low-cost overseas competitors’. Mintzberg et al (1998) also look at some of the probable tendencies for change and, although following a similar argument as Grant, go further in their explanation for change. Their identified tendencies are: • Slowing growth means more competition for market share. • Firms in the industry increasingly are selling to experienced buyers. • Competition often shifts towards greater emphasis on cost and service. • There is a topping-out problem in adding industry capacity and personnel. • Manufacturing, marketing, distributing, selling and research methods are often undergoing change. • New products and application are harder to come by. • International competition increases. • Industry profits often fall during the transition period, sometimes temporarily and sometimes permanently. • Dealers’ margins fall, but their power increases. The above arguments indicate that, rather than increase business being due to the growth of the market itself (as in

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