Question

Identify a growth industry, a mature industry, and a declining industry. For each industry, identify the following: (a) the number and size distribution of companies, (b) the nature of barriers to entry, (c) the height of barriers to entry, and (d) the extent of product differentiation. What do these factors tell you about the nature of competition in each industry? What are the implications for the company in terms of opportunities and threats?

Answer 1

An example of a growth industry is technology industry. The companies in this industry show quickly growing sales figures. One risk associated with this industry is the risk to technological setbacks which can obstruct progress. The top three companies in technology industry are apple inc. with the revenue of $182 billion, hewelett Packard with the revenue of $111 billion and IBM with the revenue of $94 billion. The main barriers to entry to new companies sin this industry is the larger reach of industry leaders and an already established network of sales and clients. They have an already established structure of market and sales. Massive investment in research and development is also a great barrier to entry.

A mature industry is the industry in which future growth is limited such as automotive industry. The size of top three companies in automotive industry are: Toyota Motor Corp. $214 billion, Volkswagen: $101.7 billion, Daimler: $84.3 billion. Multiple barriers to entry exist within the automobile industry. the main barriers is the extremely high amount of capital that is required to purchase physical manufacturing plants, raw materials, as well as to hire and train employees. Manufacturers must be able to achieve economies of scale. The product differentiation in the automotive industry is mainly due to information technology because of which competition is increasing fast. The manufacturers need to adopt differentiation strategies in order to take advantage of the opportunities.

An example of declining industry is railroad industry due to the introduction of new means of transport approximately at the same cost. Here the main war between the competitors is the price war. Railroad has failed to remain competitive in terms of pricing and benefits provided by air transport. this industry has a monopoly.barriesr to entry is the large sunk cost and the large
capital expenditures are required to construct a new railroad .in terms of competition f the potential
entrant is well capitalized, it might be able to afford to build or buy infrastructure
facilities comparable to the incumbent’s.