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Exploring the Phases of Industry Life Cycle and Their Effects on IT-based Products

Exploring the Phases of Industry Life Cycle and Their Effects on IT-based Products

At Literature Review of industry life cycle

The concept of industry life cycle is one that relates to the various stages that an industry moves through right from initial product entry, up to its eventual decline. Typically, there are five stages or phases in the industry lifecycle. Gort and Klepper (1982) originally identified these five stages. These five stages include early stage, innovation phase, shakeout or cost phase, maturity phase and finally decline phase. The work of Klepper (1997) explored the concept of industry life cycles. His work reviewed a series of evidence on the entry, exit, corporate survival, and product innovation and organization structure in new and emerging industries in order to assess if these industries go through the regular business cycles as they progress towards old age. His work acted as a clear depiction of what happens in the evolution of modern age industries and product life cycle is what is used in elucidating this evidence. Yoo (2000) explored the theory of Industry Life Cycle by deriving an equilibrium timing of both entries and exits, coupled with the equilibrium output levels spanning the entire industry life cycle period. His work also examined the effects of rise in entry costs. By means of an extended model having three entrants, his work indicated that the very fist entry might effectively be delayed with the third firm and that the less efficient company may be used as the first entrant in certain exceptional cases. Maksimovic and Phillips (2008) examined industry life cycle about acquisition and investment. Their main work was however aimed at finding out if really, the firm organization matters in this process.

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The work of Volpato and Stocchetti (2008) explored the management of product life cycle in the auto manufacture industry. They did this by evaluating the effectiveness of the carmakers using the product life-cycle model. Their work discovered certain interesting results about product life cycle. The first one is that new product development process must be timed appropriately by planning with regard to several generation of a product that are to be developed on a similar platform as opposed to basing it on the next generation model only. Transition management from the marketing point of view must be conducted in order to ensure a successful sale of products. Product policy in the product life cycle process such as differentiation is not as effective as product innovation. Simons (2011) explored the characteristics of product markets and industry life cycle. The work of Giachetti, Marchi, and Corradini (2012) presented the best work on the concept of industry life cycle within the technology-based arena. Their work explored the evolution of company’s product strategy over the entire life cycle of information technology industries. The most interesting point that can be extracted from their work is that the global mobile phone industry experienced or entered the shake-out/cost phase in the 2000s. Strategy has therefore shifted from product towards process innovation. Innovation is also noted to play a major role in industry maturity.

1.1 Phases of industry life cycle

The work of Dinlersoz and MacDonald (2009) identified the following five phases in the development and maturity of an industry.

Early Stage Phase- This is an alternative product design as well as positioning stage. It involves the establishment of range as well as boundaries within a given industry

Innovation Phase- In this stage, product innovation is noted to decline while process innovation kicks in. It is at this phase that the ‘dominant design’ arrives

Shakeout Phase- At this stage, firms settle on their ‘dominant design’ and they achieve their economies of scale. This forces the smaller industry players to exit or be acquired. Barriers of entry get extremely high and large-scale consolidation is achieved.

Maturity- In this stage, growth is noted to be no longer the focus and both cash flow and market share become the main goal of firms that are left in operation.

Decline – At this stage, industries experience a decline in revenues. A new industry may replace the existing industry as a whole

This literature review indicates that there is a general lack of literature or knowledge on the role of industry life cycle in the development and marketing of information technology-based products and services such as the Android Smartphone technology system. In this paper, we explore this gap in knowledge through a critical analysis of the Smartphone industry. A case in point is how and when the Android OS changed the smartphone life cycle as depicted in Ferreira’s (2011) article.

2.0 Three themes that are present in Ferreira’s (2011) article titled “Android OS changes Smartphone life cycle”

A review of Ferreira’s (2011) work indicates that there are three main dominant themes. These are changing nature of customer needs, technological advancement and corporate social responsibility

2.1 Changing customer need

The global smartphone ecosystem is rapidly changing because of the dynamic nature of consumer needs. For companies to remain competitive, they must be able to identify with the rapidly changing consumer needs and then prioritize their aims and objectives along these lines. The smartphone industry has seen a phenomenal growth in terms of user experience and operating system development. The Android operating system, a derivation of Linux operating system has rapidly shifted consumer demands from the iOS powered iPhone to Android operating system devices.

Consumers’ need for stylish and highly multi-functional cell phones is what has driven the development of smartphones and their respective operating systems (Lin and Ye, 2008, p.617). It is important for manufacturers and other players within the smartphone ecosystem to monitor the dynamism of consumer needs in order help them in gaining a competitive advantage. Advancements within the smartphone ecosystem are continuously increasing and surpassing one another as new versions are constantly hitting the market at great speeds. According to Kano’s theory of customer satisfaction, customer satisfaction is directly proportional to the degree to which a given product or service is adequately functional. The changing nature of customer needs has led to constant operating system upgrades.

2.2 Technological advancement

Advances in technology have created a number of innovations within the smartphone ecosystem. The advent of Android operating system has resulted in the creation of better and more efficient smartphone systems. The Android technology offers a perfect example of how technology can be can be leveraged to enhance user experience CITATION HoT11 l 1033 (Ho & Chen, 2011)

2.3 Corporate Social Responsibility

Kotler and Lee (2005) defined the concept of corporate social responsibility as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources” (p.3). This means that a given business entity must have objectives that surpass financial gains. Within the smartphone ecosystem, players must ensure that all hardware and software applications are built while having the benefits to the community and environment in mind. In the past, the global smartphone industry was heavily criticized for building their hardware from minerals sourced through illegitimate and conflict-ridden sources. Titanium, Gold, Tungsten and Tin, the base materials for smartphones’ electronics were for long sourced from the eastern Democratic Republic. These minerals were being sourced in places where countless number lives were lost due to blood money generated from the illegal mining and smuggling activities in those areas. In other words, the money from minerals bought by the manufacturers of smartphones was being used to fund armed militias. This calls for some sort of accountability and social responsibility. In is also important for the smartphone application developers to ensure that their products consume less electricity or energy. This was they would be advancing the global sustainability agenda.

Industry background of smartphone industry life cycle  diagram and it’s industry analysis (use graphs)

A review of extant literature suggests that the smartphone industry is approaching its maturity phase. The global smartphone industry is currently at an advanced growth phase. It is actually towards the end of growth phase and is fact-approaching maturity. Innovation is noted to be the key driver of this industry towards maturity CITATION Wes07 l 1033 (West & Mace, 2007).

Fig.1 Smartphone industry life cycle

Industry analysis

Introduction phase

The smartphone industry came into being in 1993 with the introduction of IBM Simon. This phone had PDA capabilities and was, arguably, the very first smartphone CITATION Ree10 l 1033 (Reed, 2010). This phase ended sometime in 1999.

Growth phase

The Smartphone industry entered its growth phase in 2002 with the multiple releases of smartphones such as Palm One, Pocket PC and Black Berry. This stage has had a steady rise but was recently forecasted to headed for a slump in growth rates (Kuittinen, 2013)

3.1 Apple industry life cycle and its analysis

A review of Apple Inc operations reveals that its industry life cycle is a unique one. This is due to the nature of product life cycles that it maintains for virtually all of its products. According to Yadegari (2012), apple has a way of ensuring that its products are always in the introduction and growth phases. In this company, the introduction stage includes the release of the original iPad, iPhone as well as iPod. When it comes to the growth stage, the company has a way of maintaining its products in this stage and to them “backwards”

Fig.2 Apple’s industry life cycle

Within the product life cycle, instead of allowing its products to reach maturity phase, it releases new and improved features. The company does this by improving its product quality, styles and well as improving its technology. This is best seen in the way it handles its products such as iPad Mini and iMac product ranges.

Fig. 3 iPhone product life cycle (Euromonitor, 2011)

Apple’s makes minor upgrades to its hardware as well as features with every version. A perfect example is the use of product extension in its product ranges. This is aimed at taking care of the needs of various consumer segments. At a time when iPhone was approaching its maturity stage, it released a low-cost model of its iPhone 4 that has no front-facing camera as well as retina display. Euromonitor (2011) reiterated this to have been an excellent offer to the late notes this adopted in the emerging economies such as India and China.

3.2 Samsung industry life cycle and its analysis

Samsung is an undisputed leader in the realm product life cycle design. The continuing rise in demand for smartphones coupled with competition that gets worse everyday makes indicates that the smartphone industry is at growth phase. This means that Samsung Mobile is at its growth phase as a company. The product life cycle of Samsung products is less than a year.

Critique of existing industry life cycle models and a review if they are valuable in today’s industry and what is it that it is missing.

The concept of industry life cycle is, in a profound one. This is because companies can use it in setting out their short and long-term objectives. A company that knows that it operates in an industry at an advanced or mature stage must consider venturing into other industries with growth potential while those that operate within a growing industry must formulate strategies for gaining a competitive advantage and accumulating as must profit as possible.

Despite its noble potential, the concept of industry life cycle as conceptual frameworks fails to consider the importance of services to every industry. The work of Cusano, Suarez and Kahl (2007) noted that existing models of industry life cycle main focuses on the changes in both products and services but with a conspicuous failure to explore the role of services in the cycle. There is therefore a need for the role of services at various stages in industry evolution to be incorporated into the existing industry life cycle models.

References

BIBLIOGRAPHY Cussamano, M., Suarez, F. S., & Steve, K. (2007). Product,Process,Service:A New Industry Lifecycle Model. Massachussets: Massachussets Institute of Technology.

Dinlersoz, E., & MacDonald, G. (2009). The industry life cycle of the size distribution of firms. Review of Economic Dynamics , 648–667.

Eurominitor. (2011, August 2). Smartphones Strategy: Case Studies . Retrieved 5 24, 2013, from Euromonitor: http://blog.euromonitor.com/2011/08/smartphones-strategy-case-studies.html

Ferreira, A. (2011). Android OS changes smartphone life cycle.

Giachetti, C., Marchi, G., & Corradini, R. (2012). Users’ Ability to Anticipate Incremental and Radical Innovation in Online Communities: The Role of Product Knowledge and Willingness to Participate in the Community Life. Working Paper No. 15/2012. Department of Management, Università Ca’ Foscari Venezia.

Gort, M., & Klepper, S. (1982). Time Paths in the Diffusion of Product Innovations. 630-53.

Ho, T., & Chen, R. (2011). Leveraging NFC and LBS Technologies to Improve User Experiences. International Joint Conference on Service Science (pp. 17-21). Taipei, Taiwan: IEEE.

Klepper, S. (1997). Industry Life Cycles. Vol 6 (1) (pp. 145-81). Oxford University Press.

Kotler, P., & Lee, N. (2005). Corporate Social esponsibility: Doing the Most Good for Your Company and Your Cause. Hoboken, NJ: Wiley & Sons, Inc.

Kuittinen, T. (2013, April 4). How Dangerous is the Current Smartphone Slowdown? Retrieved May 24, 2013, from Forbers.com: http://www.forbes.com/sites/terokuittinen/2013/03/04/how-dangerous-is-the-current-smartphone-slowdown/

Lin, F., & Ye, W. (2009). Operating System Battle in the Ecosystem of Smartphone Industry. 2009 International Symposium on Information Engineering and Electronic Commerce (pp. 617-621). IEEE.

Maksimovic, V., & Phillips, G. (2008). The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter? Journal of Finance , 673-709.

Reed, B. (2010, June 18). A Brief History of Smartphones. Retrieved May 25, 2013, from PCWorld.com: http://www.pcworld.com/article/199243/a_brief_history_of_smartphones.html

Simons, K. L. (2011). Product Market Characteristics and the Industry Life Cycle. New York: Economics Department, Rensselae.

Volpato, G., & Stocchetti, A. (2008). Managing product life-cycle in the auto industry: evaluating carmakers effectiveness. MPRA Paper 29381. Germany: University Library of Munich.

West, J., & Mace, M. ( 2007). ENTERING A MATURE INDUSTRY THROUGH INNOVATION: APPLE S IPHONE. Paper presented at the DRUID Summer Conference 2007,, June 18 – 2. Copenhagen, CBS, Denmark.

Yadegari, S. (2012, October 24). Apple Inc. and the product life cycle. Retrieved May 25, 2013, from WordPress: http://symkt.wordpress.com/2012/10/24/apple-inc-and-the-product-life-cycle/

Yoo, J. (2000). A Theory of Industry Life Cycle. JOURNAL OF ECONOMIC DEVELOPMENT,Vol 25 (1) .

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