Which of the following statements concerning companies in different industry environments is most accurate?
- Companies in mature industries tend to focus on efficiency gains and gain market share through superior products.
- An industry’s experience curve declines with a decrease in the utilization of capital equipment and spreading overhead over a fewer number of units.
- Companies in fragmented industries would not be highly price competitive because they tend to think individualistically, making coordination difficult.
Solution
A is correct. Companies in mature industries are likely to pursue replacement demand rather than new buyers and are probably focused on extending successful product lines rather than introducing revolutionary new products. Therefore, they tend to focus on cost rationalization and efficiency gains rather than on taking a lot of market share. Furthermore, companies with superior products or services are likely to gain market share.
B is incorrect. An industry’s experience curve declines with an increase in the utilization of capital equipment and spreading overhead over a larger number of units.
C is incorrect. Companies in fragmented industries would be highly price competitive because they tend to think individualistically making coordination difficult.
