Changes in Stages of Industry Life Cycle

Topics: Inflation, Soft drink, Fast moving consumer goods Pages: 5 (1873 words) Published: September 21, 2011
A concept relating to the different stages an industry will go through, from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle. They are defined as:

i. Early Stages Phase - alternative product design and positioning, establishing the range and boundaries of the industry itself.

ii. Innovation Phase - Product innovation declines, process innovation begins and a "dominant design" will arrive.

iii. Cost or Shakeout Phase - Companies settle on the "dominant design"; economies of scale are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry become very high, as large-scale consolidation occurs.

iv. Maturity - Growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the space.

v. Decline - Revenues declining; the industry as a whole may be supplanted by a new one.

The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in the economy with a total market size in excess of Rs 60,000 crore. This industry essentially comprises Consumer Non Durable (CND) products and caters to the everyday need of the population. The FMCG sector represents consumer goods required for daily or frequent use. The main segments of this sector are personal care (oral care, hair care, soaps, cosmetics, and toiletries), household care (fabric wash and household cleaners), branded and packaged food, beverages (health beverages, soft drinks, staples, cereals, dairy products, chocolates, bakery products) and tobacco. The Indian FMCG sector is an important contributor to the country's GDP. It is the fourth largest sector in the economy and is responsible for 5% of the total factory employment in India. The industry also creates employment for 3 m people in downstream activities, much of which is disbursed in small towns and rural India. This industry has witnessed strong growth in the past decade. This has been due to liberalization, urbanization, increase in the disposable incomes and altered lifestyle. Furthermore, the boom has also been fuelled by the reduction in excise duties, de-reservation from the small-scale sector and the concerted efforts of personal care companies to attract the burgeoning affluent segment in the middle-class through product and packaging innovations. Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite, in reality, the sector meets the every day needs of the masses. The lower-middle income group accounts for over 60% of the sector's sales. Rural markets account for 56% of the total domestic FMCG demand. Many of the global FMCG majors have been present in the country for many decades. But in the last ten years, many of the smaller rung Indian FMCG companies have gained in scale. As a result, the unorganized and regional players have witnessed erosion in market share. INDUSTRY ANALYSIS OF INDIAN FMCG SECTOR

India is an important market for FMCG players. The Indian FMCG sector is the 4th largest in the economy with total market size of around US$ 13.1 billion. During 1950’s to 1980’s there was a low investment as the purchasing power was low. The govt. had put a lot of emphasis on the development of small scale sector. The existing companies like HLL were purely focused on the urban area. However, post liberalization the scenario changed marking the entries of the MNCs in the country.The focus shifted from urban to rural areas. Large Base: With a population of 1 bn people, around 70% of the household lives in the rural areas. The total number of rural households is expected to rise from 144 mn in 2007 to 153 mn in 2010 which represents the largest potential market in the world India's FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal...
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