Wk 9: Business Life cycle

What are the 4 stages of the business cycle?

1. Market Development

2. Growth

3. Maturity

4. Decline/Renewal

What does the market development stage entail?

• Product development (from technical feasibility to marketability);

• Acquiring seed funding (financing startup)

What does the grwoth phase entail?

• Growing market for product viability (both developed and to be developed products);

• At this stage business growth comes from management growth

• Primarily concerned w/ breaking even & profitability

  • Note: profits typically lag behind sales at this stage

• Substantial capital requirement

  • E.g: Initial Public Offerings (IPOs)

What does the maturity phase entail?

• Increased market competition leads to increased market saturation;

• Loss of market power;

• More payouts to investors & larger amounts of debt taken on

What does the decline/renewal phase entail?

• Declining market performance, profitability and ability to pay back debts risks defaulting covenants;

• Bankruptcy in extreme cases;

• Renewal may be achieved by:

  • Innovative new products;

  • New owners and/or management;

  • New strategies and/or mission