Porter’s model of industry/market evolution - Marketing Management

Porter1 distinguishes between the following three broad stages in the evolution of an industry/ market:

  • emerging industry;
  • transition to maturity;
  • decline.

Industry Evolution Stages

Each of these stages has its own particular characteristics, some of the more important of which are shown for each stage.

Emerging industry:
uncertainty among buyers over:
product performance;
potential applications;
likelihood of obsolescence.
uncertainty among sellers over:
customer needs;
demand levels;
technological developments.
Transition to maturity
falling industry profits;
slowdown in growth;
customers knowledgeable about products and competitive offerings;
less product innovation;
competition in non-product aspects.
Decline
competition from substitutes;
changing customer needs;

demographic and other macro-environmental forces and factors affecting markets.

Porter then uses the characteristics of each stage to suggest the following strategies as being appropriate to each:

Emerging industry:

Strategies developed to take account of industry competitive structure characteristics i.e.:

  • threat of entry;
  • rivalry among competitors;
  • pressure of substitutes;
  • bargaining power of buyers and suppliers.

Transition to maturity:

Strategies focused on:
  • developing new market segments;
  • focusing strategies for specific segments;
  • more efficient organizations.

Decline

  • seek pockets of enduring demand;

or

  • divest.

Clearly this approach is similar to the conventional concept of product life cycle analysis in identifying the stage, specifying the characteristics of each stage, and suggesting appropriate strategies for the stages. Porter has developed the notion of industry life cycle further by linking it to the ‘strategic position’ of the individual organization. Strategic position is categorized in terms of whether the individual organization is a leader or a follower.

Genetic engineering and biotechnology are examples of what Porter would classify as ‘emerging’ industries. At the moment in these industries there is substantial jockeying for position amongst the incumbents. Some organizations, however, are already emerging as leaders. For example, in genetic engineering, particularly in the area of food production, Monsanto is probably ahead of the field. A good example of an industry in Porter’s stage of ‘transition to maturity’ is the market for cars in the West, which has seen companies such as Mercedes and Volkswagen paying more attention to developing new market segments.

It is not difficult to find examples of industries in Porter’s ‘decline’ stage. The textile industry in the UK is probably a good example of this. Coates Viyella, a once major employer in the UK textile industry has recently pursued strategies of divestment while at the same time seeking pockets of enduring demand – just as Porter suggests.


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