Mature Industry

A Mature Industry is one that experiences almost nil or slow increases in demand, as the growth in such industries has nearly leveled out. Companies operating in these industries are well-established and have been in the market for a long time. They focus on stability as opposed to working on growth or expansion.

When researchers and analysts study the industries that have been in the market for a while, they understand how the market has changed over a given period. It helps identify the changes in the market, particularly those that a company operating in the sector can logically and reasonably expect. This data allows stakeholders to identify or develop strategic options to adapt to current or forthcoming business conditions.

• A mature industry is one that focuses more on stability than on expansion as it has already become an established market entity.
• Industries are identified as mature when the demands for their goods and services reach a saturation point. Such companies, then, hardly witness an increase in growth as it has already recorded their maximum highs.
• The factors affecting the profitability of such established sectors include a lack of product differentiation, limited international competition, and a slow-paced increase in demand.
• These markets are characterized by slow growth, are home to established businesses and stable markets, and promote cost competition, among other things.

A mature industry has been in the market for a long time and is unlikely to see a growth spurt in the future. Industries mature when market demand for goods and services reaches a saturation point. Companies in such industries move away from rapid growth and shift toward relatively slow growth. In such industries, we usually see that nearly all buyers in the market already use the products and services companies in these industries offer.

Other factors of a mature industry that determine if a sector is maturing are defined by the following:

• The demand is mainly in the form of replacement orders, and
• The industry’s growth depends on whether attracting new buyers is possible.

As the industry has an established market and customer base and encounters little demand in the form of new customers, there is no product innovation. While this may mean less work for the industry, it has certain downsides. The profitability of established sectors is frequently affected by a lack of product differentiation, slow demand growth, and international competition.

New products may be introduced occasionally. When they are launched, even unappealing sectors of the economy can build lucrative niche markets with high demand growth, few rivals, and possibilities for product differentiation. In such situations, companies can also focus on maximizing efficiency, improving current offers, or creating new complementary services to sustain competitiveness.

Businesses functioning in mature industries are of great value to investors looking for consistency and low risk. They produce regular earnings and pay reliable dividends, ensuring constant income flow. Hence, equity (stock) and debt (bond) investors often gravitate toward mature industries because they offer slower but more reliable returns. Consequently, mature industries are actively incorporated into various investment strategies.

The characteristics of mature industries have been discussed in this section.

• Slow Growth Rates: Compared to developing businesses, mature industries often grow more slowly. Since most of the market's potential customers have already been served, very few chances exist for noticeable expansion as the industry gets saturated.
• Established Businesses: In developed industries, a few dominant players typically establish a strong presence. It is difficult for new entrants to achieve market share because of these organizations' established economies of scale, brand recognition, and consumer loyalty.
• Stable Market: A stable market structure with a distinct hierarchy of competitors is common in established industries. The focus is on gaining market share from competitors rather than growing the market as a whole.
• Cost Competition: Cost management becomes essential in mature industries with fierce competition. Businesses work to optimize their processes, boost efficiency, and save costs to retain profitability and a competitive edge.
• Other effects: Apart from the above, mature industries have slower technological growth and often witness mergers and acquisitions.

Here are a few examples to help readers study the concept in a comprehensive manner.

Example #1

Suppose Dan is an economics student who wants to study mature industries. He researches and finds that the automobile industry fits the description well.

This industry was established long ago, and the market is ripe with opportunities nearly all the time. This means the market has seen many innovations, whether in the form of alternative fuels, electric vehicles, or other inventions. Over the years, the industry has seen a decline in the growth rate. A few players with global market share, such as Ford, Toyota, and Volkswagen, now dominate the market.

Example #2

A study was conducted in the Swedish pulp and paper industries on how companies respond to transformational pressures in a mature industry. The paper industries were established a long time back and were witnessing a decline. The reason was decreased preference for newspapers and printing papers due to sustainable practice pressures. However, as time passed, the industry adapted to changes, such as the 1960s through the 1980s saw the creation and adoption of chlorine-free bleaching technology. In the 1970s came the switch from fossil fuels to biomass fuels for energy. In the 1980s, the focus was on the reduction of sulfur dioxide emissions.

The study revealed that the industry survived these pressures because it focused on market penetration, product development, and product and process innovation. For example, they adopted a product-focused approach for their cardboard plant and developed a process focus for their pulp plant. An analysis of how adopting different approaches affected the industry revealed that competitive and resource positioning helped innovation. This shows how a mature industry handles various business situations.

The following table summarizes the differences between mature and emerging industries.

This article has been a guide to what is a Mature Industry. Here, we explain it with its examples, characteristics, and comparison with emerging industry. You may also find some useful articles here -

• Industry Life Cycle
• Infant Industry Argument
• Investment Analysis