Industry Life Cycle Analysis
Categories: Financial Theory, Education
"Circle of life" stuff. You're born, grow up, have kids (well, maybe...you’re not sure it’s the right time, given your career situation right now), get old, and (finally) die.
Industries go through a similar cycle. The study of this phenomenon is called industry life cycle analysis. Generally, the steps in an industry's development go like this: startup, then growth, followed by shakeout (where a few big competitors take over the market), on to maturity, and (finally) decline.
Think: the chain mail production industry for medieval knights. Once there was a booming IPO market for those guys. Or the telegraph pole polishing industry. There was probably a time when a few big pole polishers bought out all the small one-rag competitors. But eventually, the industry declines.
Smartphone app production seems like it will go on forever. But eventually, we’ll just plug our mind-pulse into the great central hive-brain and receive direct instructions for serotonin release. At that point, Candy Crush will become unnecessary.
Related or Semi-related Video
Finance: What is a Business Cycle?3 Views
Finance allah shmoop What is a business cycle Well here's
a guy giving his cycle the business Yeah the bike
moves forward in time but this little white mark on
the tire while it keeps returning to the same place
again and again and again So yeah that's the foundation
of the notion of business as a cycle time continues
but you know business gets hot then cold then hot
then cold and yeah you get the idea Well why
is this the case Well lots factors They mostly revolve
around the wild pagan dance of greed and fear And
they get exacerbated when governments actively monkey around with the
cost of renting money otherwise known as the raising and
lowering of interest rates And if you're new to this
whole space if you lower interest rates and make money
cheap to borrow you heat up the economy or at
least you encourage it to get hot And if you
raise the cost of borrowing money well then you're going
to try to cool it off And the reason he
might want to do that is if inflation is roaring
right All right well in the us the business cycle
Runs roughly every eight years for what is called the
short cycle of business cycles for reasons only partly known
to humankind the money cycle revolves around the presidential election
cycle when historically every couple of terms the population gets
sick of one process of messing up government and they
choose to elect a new way to mess up government
So that's The short cycle happens every seven or eight
years and you see it in the stock market with
generally meaningful corrections Along that pattern there's also ate a
long business cycle that sees major shift about every quarter
century World wars affected numbers Technology innovation affects the numbers
and other exogenous factors like pollution and labor replacement by
robots Yeah yeah it's coming and healthcare or disease changes
and or big innovations that completely repaint the pavement such
that the tire slipped and turn and twist trying to
keep the bicycle upright The key goal Look outfor bollards