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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

A firm studies its industry and finds that the industry life cycle stage shows rapid sales growth, increasing number of competitors, falling unit costs and rising profits as awareness spreads. Which stage of the industry life cycle is this?

This is the growth stage of the industry life cycle. Sales rise rapidly, new competitors enter, unit costs fall through scale, and profits increase as customer awareness spreads. Introduction has low sales and losses, maturity shows slowing growth, and decline shows shrinking demand.

  1. AGrowth stageCorrect
  2. BIntroduction stage
  3. CMaturity stage
  4. DDecline stage

Explanation

Rapid sales growth, entry of new competitors, falling unit costs due to scale and rising profits characterise the growth stage. Introduction has low sales and losses; maturity has slowing growth and intense rivalry; decline has falling demand.

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