Just like any other product life cycle, companies believe or not also have its life cycle. Starting from start-up, young growth, high growth, mature growth, mature stage and decline. Its all varies according to the industries the company operates within as well as infrastructure development and demand adaptation that enable it to be sustainable in future.
Start - Up
This is where the inception of new product or service happened. revenue are low and initial start up costs are high mainly due to lack scalabiliy (economy of scale) as well lack revenue capitalisation.
Business are in search for customers to fulfill their book orders. At this stage cash flow are tight or at negative territory, let alone profitability is not at foresight.
Young Growth
The business are experiencing rapid revenue growth with realisation of its product or service offerings meet consumers requirements in terms of simplicity, convenient, costs efficency etc.
Consumers here can be B2B (business to business) or B2C (business to consumer). The most important thing is to ensure that such offerings can cater for mass market (volume game) or premium niche market (competitive advantage).
High Growth
At this stage, the business experiencing exponential growth where scalability in terms of revenue as well as costs efficiency (either through operational efficiency or bulk discount from suppliers).
The business tends to have the capability to charge higher margin (high profitability) due to its pioneer position, aka swimming in the "Blue Sea" (less competition).
Diversifying product mix would provide the business a "sustainable" advantage if such mix is successfully delivered to the mainstream market.
$Alphabet(GOOG)$ initially lunch its open source android operating system on 23 Sept 2008, after 4 years since its launch manages to control 71% of the overall mobile operating system.
Mature Growth
Revenue tends to slow down, profit margin get thinner with more competitors joining the market offering similar or close to similar product or service.
Business tends to growing at a slow pace, with some even try to reposition its offerings to different market in hope to extend its business growth cycle.
$Meta Platforms, Inc.(META)$ realising that to bridge the gap between physical world Vs Meta world where heavily investment is pump into realising this vision.
If succesful, Mark Zuckerberg could re-write the world of internet with "third dimention"?
If fail, $177 billion invested since 2021 would be "evaporated" out of thin air. Odds are that its too much at risk to fail.
Decline
At this stage, the business is striving to maintain its growth. When revenue are declining, its a signal that the business is not delivering what the market demand.
Business feeling the pinch when cash flow runs into negative territory. Striving to maintain its busines operation by way of borrowing or equity injection.
Failure to realign its business sustainability would mean force closure of the business.
Takeway
Each business have their own life cycle, Tech business tends to have short live period due to challenging environment of not only to compete with existing and new competitors, but also to deal with technological obsolescence as compare to business like $Coca-Cola(KO)$ where its durable competitive advantage is to maintain its universal taste and ensuring that its products are globally accessable.
What industries would you prefer to invest in?
How would you access the business durable competitive advantage?
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