Industry Life Cycle & Porter’s Five Forces

Strategy toolbox

  • firm-level analysis
    • target segments
    • market size, etc.
  • industry-level analysis
    • competitive advantage analysis
    • value chain analysis

Industry life cycle and five forces

  • stages of the industry life cycle
  • Porter’s five forces analysis of industry profitability
  • influence
    • overall
    • average profitability
    • others
      • industries in the stages of Maturity and Decline will often seek government intervention or subsidies to help protect the declining industry
      • often substitutes using innovation or new technology are the root cause of decline
      • blue Ocean Strategy, sometimes called Value Innovation provides a new approach to managing mature or declining industries

Blue Ocean Strategy

Red oceans vs. blue oceans

  • overview
  • red oceans
    • compete in existing market
    • shark-infested water
    • cutthroat competition
    • limited market share
    • pricing cutting and product commoditization
    • differentiation or low cost
  • blue oceans
    • create vast new market
    • make competition irrelevant
    • create new demand
    • convert non-users for growth
    • dual advantage through value innovation
    • differentiation and low cost

The blue ocean shift

  • understand
    • get started by understanding where you are now and the current red ocean industry and why it doesn’t work
  • uncover
    • uncover what limits the size of your industry and discover the vast ocean of noncustomers you could unlock
  • reconstruct
    • find out how to get there by reconstructing market boundaries and developing blue ocean opportunities
  • launch
    • select you move, conduct rapid market tests and launch into a blue ocean strategic move
  • cases
    • the yellow tail wine blue ocean shift
      • understand
        • Deutsch distributors saw that the US budget wine industry was a red ocean, unprofitable and with many substitutes
      • uncover
        • market research said that American Coca-Cola and beer drinkers wanted a very different bold fruity flavor in wine for easy-drinking and easy selection
      • reconstruct
        • Deutsch partnered with Australian winemaker Casella to create yellow tail branding, flavor, marketing and distribution nationwide with Costco in the US
      • launch
        • the yellow tail launch was wildly successful and in 5 years time, the Australian wine has become the #1 budget wine selling 25 million bottles/year
    • Bird e-scooter blue ocean shift
      • understand
        • Bird saw that commuter bicycle ownership and city share bicycles still did not solve the first mile/last mile urban transport problem
      • uncover
        • using his experience at Lyft/Uber, the founder created a gps enabled, QR code mobile payment, dockless e-scooter and mobile app
      • reconstruct
        • Bird created a new easy-to-ride in work clothing micro-mobility day-time commuter & errand vehicle for dense urban areas with gig “chargers” paid for pickup, charge, placing
      • launch
        • the Bird e-scooter was wildly popular, reaching 100 cities in the US, Europe and ME and offering more than 10M rides

Value innovation - blue ocean shift

  • eliminate
  • reduce
  • raise
  • create new priority feature
  • cases
    • circus
    • wine
    • commuter bikes

Additional Reading