CFA Level I · CFA Level I Exam · Industry and Competitive Analysis
Which characteristic is most likely associated with the shakeout stage of the industry life cycle?
Shakeout is characterized by intense price competition and weaker firms exiting. Growth slows while capacity is excessive, pressuring profitability. High prices with losses describe the embryonic stage, and stable pricing among few rivals describes the mature stage.
- AIntense price competition and weaker firms exitingCorrect
- BSlow growth with high prices and large losses
- CStable pricing power and few remaining rivals
Explanation
In shakeout, growth slows, capacity exceeds demand, and price competition drives out weak firms. Slow growth with high prices and losses describes the embryonic stage. Stable pricing with few rivals fits maturity.
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