how the life cycle works
the idea of a cycle in a business context is borrowed from biology in biology a life cycle represents a series of changes that an organism undergoes from birth to death extended to a business setting an entity s formation and eventual decline follow a similar path to biological applications the life cycle represents the entire existence or life of something in the marketplace this includes products and services businesses and corporations and even industries in most cases even the economy goes through a life cycle we look at each of these in more detail a little further down throughout each of these types of life cycles there is a development maturity and decline phase as such the life cycle represents the length of time it takes for a product to be introduced in the market until it is eventually removed the life cycle is also commonly referred to as the business life cycle special considerationsthere is a misconception that growth tends to stop when a product or business hits its peak in the market in certain cases profits may dip or a business owner may consider selling their company during this period this may be the case for startups and newer businesses but this isn t a one size fits all approach in fact reaching the maturity stage can often mean that growth continues as margin improvements and innovations translate to an increase in income although growth can still happen when a product hits maturity a more mature firm with older products may be more likely to issue dividends than firms in the other phases this is why investors need to understand the life cycle works doing so can help them make better and more informed decisions about how to invest their money for instance it s important to note that firms that are predominately in the development phase are generally characterized by lower sales and are more speculative in nature than firms in the growth or maturity phase types of life cyclesas mentioned above there are different types of life cycles that take place the most common ones that are discussed are the product business and industry life cycles but there are others that take place in the realms of finance and investment that people should understand one of the most common types of life cycles is the product life cycle this deals with how long products last in the market from development to decline by different companies whether they are new startups or established corporations the following are the five steps involved in the life cycle of a product or service businesses also have their own life cycle this means they go through various stages that lead from their creation to their decline just like products the following are the most common stages in the life cycle of a company understanding how these stages work can make a big difference to investors and more importantly to business owners many businesses fail to get off the ground during the startup phase because owners don t take enough time and rush through the process those who are well prepared can ride the waves and better navigate themselves through any challenges that may arise to success industries and economies often follow the same stages during their life cycles these include the analysis of a business or company can show the stage a company is in and the same is true for an economy by analyzing the four stages of a company s industry life cycle financial decisions like estimating forward earning ratios and projecting future financial earnings and performance can be made with greater knowledge if we think of the economy and commerce as a living organization adapting and transforming to its surroundings we can find many biological analogies for business challenges such as survival of the fittest examples of life cyclescoca cola released this diet soda in 1963 decades before diet coke s heyday tab was the company s first foray into the diet drink market the drink became popular in the 1970s and early 1980s but its popularity fizzled out when diet coke created a decline in the tab s market share 1coca cola discontinued tab in 2020 along with other products that were underperforming this discontinuation marked the decline life cycle phase for the once popular diet beverage 2electric cars are in their growth cycle as of april 2021 the global electric vehicles market was worth approximately 140 billion in 2019 the most recent figures made available by facts factors which published a 175 page research report on the electric vehicle market the electric car is a prime example of a product in the growth phase it is estimated that by 2026 the electric car market will hit 700 billion and it s not just tesla running the electric car charge anymore top market players also include kia hyundai bmw volkswagon ford and toyota 3