A mature industry is characterized by a slowdown in growth. The maturity of the industry comes when almost all potential buyers have become real users of goods, demand is formed mainly through repeated purchases, and the growth rate of the industry is maintained by the influx of new consumers or an increase in consumption by previous buyers. The growth of mature sectors of the production of consumer goods does not exceed 5% per year, which roughly corresponds to the growth rate of the economy as a whole and the increase in the number of consumers.
The onset of maturity may slow down due to the emergence of new technologies, innovative products or other events affecting demand, but the entry of the industry into the maturity stage and the corresponding slowdown in growth rates significantly changes the competitive environment in the industry [44 pp.238-240].
The slowdown in consumer demand is exacerbating the struggle for market share. Companies focused on rapid growth are trying to lure competitors’ customers by lowering prices, various discounts, intensifying advertising campaigns and other offensive actions; Increasing the demands of customers, increasing competitive pressure on their part when making repeated purchases. Buyers have experience in using the goods, are familiar with brands and goods of different manufacturers, objectively assess the advantages and disadvantages of their products and, accordingly, try to achieve more favorable terms of sale; Strengthening the impact on cost competition and quality of service. Since all manufacturers offer products with the most attractive consumer properties, buyers make a purchase decision based on the optimal combination of price and quality of service; The undesirability of introducing new production facilities due to the threat of overproduction. The slowdown in the growth rate of the industry means for industrial companies a decrease in the need to expand production, and for retailers – in the expansion of warehouse space. In such a situation, the commissioning of new production facilities will quickly lead to the creation of excess supply and a drop in the company’s profits in the future; Difficulty updating products and developing new use cases. Manufacturers have difficulties with the creation of new consumer properties of the product, the search for new options for its use and the preservation of consumer sympathies; Intensification of international competition. Targeting high growth rates, local companies are looking to enter international markets. Some companies move production facilities to countries with lower wages to reduce costs. Product standardization and the diffusion of technological know-how reduce barriers to entry and allow enterprising companies to compete in the markets of several countries. Industries are led by companies that have managed to form a stable competitive position in most major geographical markets and win the largest shares of the global market; Permanent or temporary decline in the profitability of companies in the industry. Slower growth, increased competition, growing consumer demands and recurrent overproduction of goods have a negative impact on the overall profitability of the industry. Weak and inefficient companies find themselves in the most difficult situation; The growth in the number of mergers and acquisitions of competitors, the displacement of weak companies, the concentration of production. In fast-growing industries with growing sales volumes, even companies with weak competitive strategies succeed. But tougher competition at the maturity stage of the industry displaces weak companies from the market in accordance with the law of survival of the strongest.
With the changing nature of competition in mature industries, companies can strengthen their positions by
Reduction in the number of product groups and product models. Offering a wide range of models and consumer properties provides a competitive advantage at the stage of formation and growth of the industry, when consumer preferences have not yet been formed. In the conditions of tightening price competition and reducing profits, such a variety may be impractical, since a wide range of product modifications does not allow saving on development, inventory management, production, leads to an increase in storage costs at the level of wholesale and retail trade. The cessation of production of unprofitable and low-yield models reduces costs and allows the company to focus on the production of more cost-effective models or those types of products for which the company has a competitive advantage; Value chain optimization. The restructuring of the industry value chain leads to lower costs, improving the quality of goods and services, expanding the possibilities of differentiation and personalization, reducing the period from development to bringing goods to market. To optimize the value chain, industrial companies can mechanize labor-intensive production operations, increase labor productivity by improving production processes, introduce progressive means of production (robotic complexes, computer control of production processes, automated production). Suppliers of spare parts and components, manufacturing and trading companies can increase the efficiency of cooperation through the introduction of Internet-technologies, reducing the number of links in the value chain, introducing production methods leading to cost reduction; Cost reduction. Increased price competition encourages companies to reduce costs per unit of output. Cost reduction measures are extremely diverse and are most often expressed in the struggle to improve the conditions for the acquisition of materials and components, tighten supply control, exclude non-essential links from the value chain, develop a more economical product design, modify the company’s value chain through the introduction of electronic technologies, and form a more economical distribution system; Increase in sales. In a mature industry, it is preferable to increase sales to existing consumers than to lure a competitor’s customers. To do this, such competitive measures as the offer of related goods, additional services, new options for using the goods are used. Department stores, for example, dramatically increase the average sales volume per customer, offering additional services.
gi – videocassette rental, gas stations, eateries and cafes, departments of delicatessen products; Acquisition of competing companies. Companies in mature industries sometimes go to the acquisition of production facilities and assets of competing companies, which reduces costs, provided that the new acquisition contributes to improving production efficiency. In addition, the company gains access to the consumers of the acquired competitor and on this basis implements economies of scale. It is necessary to acquire those companies that are able to significantly strengthen their competitive position; Access to international markets. When the domestic market of the industry enters the stage of maturity, companies seek to enter the markets of foreign countries, where growth potential remains, and competitive pressure is not so great. Many multinational companies are expanding their presence in the markets of developing countries with attractive long-term prospects for economic growth – China, India, Brazil, Argentina, Malaysia. Entering the international market also makes sense in a situation where the reputation, skills and prestige of the company’s trademark won in the domestic market can be easily transferred to the markets of other countries. For example, when the U.S. domestic soft drink market entered a phase of maturity, Coca-Cola maintained its growth momentum, focusing on overseas markets where soft drink consumption is growing rapidly; Improvement or creation of new competitive opportunities. Increased competition in mature industries can be overcome by strengthening the resource base and competitive capabilities of the company. In response to competitive pressure from rivals, Microsoft has increased its cadre of highly skilled programmers, and Chevron has built an industry-leading research team and resource base to accelerate the exchange of advanced manufacturing methods and best practices among its refiners.
It should be noted that the biggest strategic mistake a company can make in a mature industry is to try to achieve an advantage simultaneously in three areas: in terms of costs, through differentiation and on the basis of focused strategies. Because of such strategic compromises, the company will not be able to achieve its goals and form a competitive advantage, since its strategy is vague, there is no stable image in the eyes of buyers, therefore, there is no chance to get into the group of industry leaders.
Other common strategic mistakes include: a delay in adapting one’s competencies and competitive capabilities due to increased competitive pressures; concentration on making short-term profits instead of creating a long-term competitive position; delay in lowering prices in response to similar actions by competitors; creation of excess capacity in the context of a slowdown in the growth of the industry; excessive advertising and promotion costs in an attempt to overcome the decline in sales volumes; insufficiently fast or insufficiently significant cost reduction.