Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle
classification generally groups industries into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are
developing, and there is high risk of failure. However, successful companies can grow at extraordinary
rates. The Indian automobile sector has passed this stage quite successfully.

In the growth phase, the product market has been established and there is at least some historical guide to
ground demand estimates. The industry is growing rapidly, often at an accelerating rate of sales and
earnings growth. Indian Automotive Industry is booming with a growth rate of around 15 % annually.
The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12.17
percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose
Vehicles by 21.39 percent in this period. The Commercial Vehicles segment grew marginally at 4.07
percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial
Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales of
Goods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent
during April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of
7.92 % during this period, with motorcycles and
electric two wheelers segments declining by 11.90
percent and 44.93% respect. However, Scooters
and Mopeds segment grew by 11.64% and 16.63%
respect. The growth rate of the automobile industry
in India is greater than the GDP growth rate of the
economy, so
the automobile sector can be very well be said to be
in the growth phase.

As the product matures, growth slows as

penetration reaches practical limits. Companies
began to focus on market share rather than growth. Industry demand tends to follow the overall
economy, but the scope of growth of the automobile sector is very much possible in India due to the
increasing income of the middle class and their income as well as standard of living.
 4.) SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process.
Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W),
and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the
strategic environment is referred to as a SWOT analysis. SWOT analysis of the Indian automobile sector
gives the following points:
 Strengths
Large domestic
market Sustainable
labor cost advantage
Competitive auto
component vendor
base
Government incentives for manufacturing plants
Strong engineering skills in design etc
Weaknesses
Low labor productivity
High interest costs and high overheads make the production uncompetitive
Various forms of taxes push up
the cost of production Low
investment in Research and
Development Infrastructure
bottleneck

Opportunities
Commercial vehicles: SC
ban on overloading Heavy
thrust on mining and
construction activity
Increase in the income level
Cut in excise duties
Rising rural demand

Threats
Rising input costs
Rising interest rates
Cut throat competition