Researching On Business Strategy Based On Industrial Life Cycle

Being guided by theory of industry economics and business strategy management, this research explores the paradigm and characteristics of industry life cycle on different stages , and factors which influence the industry developing process. By positive research and comparative analysis, the dissertation discusses systematically the relations among the paradigm of business development strategy, life stages of enterprise's new business or dominant business and characteristics of the industry developing stage. On the basis of the above analysis, the dissertation further researches the relations between business combination patterns of multi-business enterprise and the life cycle characteristics of industry which enterprise's businesses involve.Michael Porter thinks the nature of competitive strategy was building the relations between corporation and its environment. The industry life cycle is the vital appearance of the enterprise's surrounding. In theory, there are many relations between industry life cycle and corporation's development strategy, which at least lies in the following three aspects: facing different stages of industry life cycle, which strategic chances can enterprise grasp;how do enterprise's strategies adapt to different stages of industry life cycle;which influence do the characteristic of the industry exert on enterprises strategy. The above analysis makes us know more about the relations between industry life cycle and enterprise strategy, and provides the rules of making strategy according to industry life cycle.Furthermore, from the perspectives of game theory, owing to different stages of industry life cycle and characteristics of industry competition, the enterprise's strategic action is different. If the competitive strategies can succeed not only depends on industry environment but also depends on competitor's strategy. For a instance, in the introduction stage of industry development, enterprises will choose one action from preemption and follow, in fact this decision reveals enterprise the process of acquiring the advantage by choosing from acting as first-mover and acting as second-mover. The generation of first-mover advantage and second-mover advantage largely depends on competitive ways which are quantity and price. Through analysis in this dissertation, we found that in the entry game based on quantities, whether the quantities can be adaptive or not, first-mover has advantages. In the entry game based on price, whether the product is heterogeneous or not, the second-mover has advantages. During growth stage of industry, the first-mover becomes incumbent business. At this stage the incumbent enterprises has first-mover advantages (which is quiet different from the introduction stages) which can form the entry barriers to the follower. Whether incumbent enterprises accommodate or deter the follower depends on which way can bring more advantages. This dissertation offers the incumbent enterprise's possible strategy by game theory analysis. During the mature stage, the enterprises face the choice of diversification. On the one hand this is just because that the business can not gain more profits by existing products, while the industry will step into decline stage, owing to thinking of decreasing dangers, the enterprise will diversify. On the other hand the existing market can provide large sum of cash, which provides the necessary physical supports for thediversification. The enterprises' intention of diversification is to decrease danger, so the industry developing speed per unit of danger is used as a indicator of diversification decision in this dissertation. The enterprises will enable the industry developing speed per unit of danger maximum when they carry out diversification strategy. According to the indicator, the enterprise distributes the resource between the new industry and the old one. During decline stage of industry, too many existing enterprises will result in deficit, but it is profitable if there are less enterprises leaving in the industry. So in order to gain the corresponding profit, the war of attrition among the enterprises will break out. The failure will exit the industry and the winner will stay on.The industry life cycle influences not only the general process of business strategy formation but also the result of strategy formation, i.e. the combinations of business strategy. Business strategies must be made according to factors such as technology, demand, competition and organization. But the characteristics of these factors are different in the different industry stages, so the combinations of strategy must vary with the industry life cycle. According to this idea, the dissertation analyze the variation of the above four factors in the industry life cycle, then draw the corresponding combination of business strategies, and construct the general model of business strategy according to industry life cycle. Finally the dissertation studies the effects that the industry life cycle exerts on the business strategy implementation and offers the approach of business strategy implementation according to industry life cycle and the way of how to create competitive advantages through strategy implementation.At last, based on the above related theory analysis, and combined with the author's working experience, the relations between paradigm of industry life cycle and the pattern of business development strategy are analyzed by taking the formation process of Cheng Du institute's future development strategy as example. Some enterprise strategy suggestions are prompted based the analysis.