Environmental Scanning and Industry Analysis, Strategic Management

Discuss how industry maturity affects industry competitive forces

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On December 25, 2024

Industry maturity significantly impacts the competitive forces within an industry, as described in Porter’s Five Forces framework. As an industry progresses through its lifecycle—introduction, growth, maturity, and decline—the nature and intensity of competition evolve. Let’s examine how industry maturity affects competitive forces:

1. Threat of New Entrants 🚪

In Early Stages:
- High growth rates and untapped potential attract many new entrants.
- Barriers to entry may be low due to limited established competition.
In Mature Industries:
- Market saturation and strong existing players with economies of scale make it harder for new entrants to succeed.
- High capital requirements, brand loyalty, and established supply chains further raise barriers.
Example: The electric vehicle (EV) industry in its growth stage sees many startups entering, but the mature automotive industry has high entry barriers due to significant R&D and branding costs.

2. Bargaining Power of Buyers 🛍️

In Early Stages:
- Buyers have limited options, so their bargaining power is low.
- Companies focus on product innovation and customer acquisition.
In Mature Industries:
- Buyers gain power due to the abundance of competitors offering similar products.
- Price sensitivity increases, and customer loyalty becomes crucial.
Example: In the smartphone industry (mature), buyers can easily switch between brands like Apple, Samsung, or Xiaomi based on price and features.

3. Bargaining Power of Suppliers 📦

In Early Stages:
- Suppliers may have high power as businesses are small and dependent on a few key suppliers.
In Mature Industries:
- Businesses grow larger, gaining the ability to negotiate better terms with suppliers.
- Vertical integration or alternative sourcing reduces supplier power.
Example: In the mature food industry, large brands like Nestlé and PepsiCo exert significant influence over suppliers.

4. Threat of Substitutes 🔄

In Early Stages:
- Substitutes may not yet be well-developed or recognized.
- Focus is on establishing a unique value proposition.
In Mature Industries:
- Substitutes become more prominent, intensifying competition.
- Companies must innovate or differentiate to reduce substitution risks.
Example: In the energy industry, mature fossil fuels face growing competition from renewable substitutes like solar and wind power.

5. Industry Rivalry Among Existing Competitors ⚔️

In Early Stages:
- Rivalry is moderate as companies focus on growth and market penetration rather than directly targeting competitors.
In Mature Industries:
- Rivalry becomes intense due to market saturation, slow growth, and reduced differentiation.
- Companies compete on price, quality, and efficiency to maintain or grow their market share.
Example: In the soft drink industry, mature competitors like Coca-Cola and PepsiCo engage in aggressive marketing and pricing battles.

Summary of Industry Maturity’s Impact

Force	Early Stages	Mature Industries
Threat of New Entrants	High due to low barriers.	Low due to high barriers and established players.
Buyer Power	Low, as options are limited.	High, due to abundant alternatives.
Supplier Power	High, as businesses are dependent.	Low, as companies gain negotiation power.
Threat of Substitutes	Low, as substitutes are underdeveloped.	High, as substitutes mature and compete.
Rivalry	Moderate, as growth opportunities exist.	High, due to saturation and slow growth.

In Simple Terms:

An industry is like a person growing up:

In its youth (early stage), it’s full of opportunities, and competition is still figuring things out.
As it matures, it becomes stable but crowded, leading to tougher fights for survival.
Companies in mature industries must focus on efficiency, innovation, and differentiation to stay competitive. 🌟