The corporate and business life cycle comes after a familiar design. It begins with an idea, that builds up into something, which evolves into an operating business, that matures, and eventually dies. I have also highlighted the transitions that determine whether an organization moves to the next stage and the mortality rate especially early in the life-span cycle is high. There are wide distinctions across companies in how long they take to climb the life cycle, how much time they spend as mature companies and exactly how quickly they decline. The space of the mature phase shall rely upon the nature of your competitive advantages, how big they are and exactly how long they last.
If your competitive advantages are strong and sustainable, your mature stage can last for a long time. Consumer product companies with strong brands, one of the most powerful and most lasting competitive advantages, have longer mature phases than companies which have a cost advantage, a more transient and short-term competitive advantage.
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In drop, the acceleration with which your business will deplete will depend upon (a) how quickly new companies can get into the market (b) how quickly they can range up and exactly how willing customers are to try services. Quite simply, you see that a mirror image of the qualities that allow for speedy development also contribute to a quick decline.
In the finish game, your alternatives rely on what your staying assets look like and if they can be liquidated, without significant losses. If they can, your end will be speedy and even pain-free perhaps. If not, your death throes can hurt and long. Before we start a discussion of how tech companies are different from non-tech companies, we must think about what separates the two groups, and that separation becomes hazier each day.
In the 1980s, at the start of the tech trend, the difference was a straightforward one. If a company’s products or services were computer-related (either personal or business computers), it was classified as a technology company. That difference allowed us to recognize Microsoft, Atari, and Apple as technology firms, and bring in HP, Digital, and IBM Equipment as the old guard.
That definition no more works, as nearly every product we buy (from devices to cars) has a computerized component to it, and it has designed that deciding whether an ongoing company is a technology company is a common sense call. Why do we care about these distinctions? First, they have useful implications for experts and portfolio managers.