Skip to content

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

Kaveri Motors, an Indian two-wheeler maker, assesses the industry lifecycle. Sales growth has slowed, most buyers are repeat purchasers, price competition is intensifying and weaker firms are exiting through mergers. A strategist applying the industry life cycle model should conclude the industry is in which stage, and the most fitting strategic emphasis?

The industry is in the maturity stage, so the emphasis should be cost efficiency and defending share. Slowing growth, repeat purchasing, intensifying price competition and consolidation are typical of maturity. Growth would show fast-rising sales, and decline would show shrinking demand, neither of which is described.

  1. AIntroduction stage; building product awareness
  2. BGrowth stage; capturing market share through capacity expansion
  3. CMaturity stage; cost efficiency and defending shareCorrect
  4. DDecline stage; immediate harvesting and exit

Explanation

Slowing growth, repeat buyers, price competition and consolidation characterise maturity, where firms stress cost control, differentiation and protecting share. Growth would show rapidly rising sales and new buyers. Decline would show falling absolute demand, which is not stated.

Did you get it right without looking?

One question tells you little. A timed set on Strategic Analysis: External Environment shows your real accuracy, how long you take and where you lose marks.

Practise Strategic Analysis: External EnvironmentFree diagnostic mock

More Strategic Analysis: External Environment questions