What is shakeout phase

Investment terms

What is "Industry Lifecycle"

A concept related to the different phases an industry goes through, from the first product entry to its eventual demise. There are typically five stages in the industry life cycle. They are defined as follows:

I. Early stage - alternative product design and positioning, establishing the reach and limits of the industry itself


Ii. Innovation phase - product innovation declines, process innovation begins and a "dominant design" arrive


Iii. Cost or Shakeout Phase - Companies rely on the "dominant design"; Economies of scale can be achieved, forcing smaller players to acquire or quit altogether. The barriers to entry become very high as large-scale consolidation takes place.

Iv. Time To Live - Growth is no longer a priority, market share and cash flow become the main goals that are left in the business space


V. Decline - sales declining; the industry as a whole will be replaced by a new one.
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The composition of the phases within the industry life cycle is a constantly changing mix. The standard model is usually dealt with manufactured goods, but today's US economy is a services economy that is either on top of the industry or as a natural extension of a declining-based product model. The advent of the Internet alone is transforming many business models from "things" to people and services.

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