Industry Life Cycle Essay

It is quite natural that people concerned with environmental issues could worry about the convenience industry. As it operates 24 hours and required high frequency deliveries, it inevitably include in the strong criticism because high frequency delivery is said to cause traffic jams and increase exhaust gas pollution. Even the 24-hour operation mode is criticized by many quarters in light of environmental problems, and even social problems like the increase of crime. To deal with these problems, convenience store takes up with reducing the numbers of deliveries through their effort. It also invests on electricity-saving equipment to be installed at all of its chain stores to save the electricity of electric lights and also the electricity of air-conditioners simultaneously. Industry Life Cycle The nature of corporate strategy will change as industries move along the life cycle. Introduction Phase In 1927, the Southland Ice Company is founded in Oak Cliff, Texas Tote’m stores introduced. At the same time, other types of stores were emerging such as â€Å"midget† stores and â€Å"motorterias† or mobile convenience stores. Sometimes supermarkets had small outlets in rural areas for people. The pattern of the emerging â€Å"convenience† types of stores grew modestly until World War II (although they were not yet called â€Å"convenience stores†). The big factor in all of these operations was fast service. In this phase, industry performed a high price, but profit is low due to investment in new category. Growth Phase At the end of the World War II and the increased ownership of automobiles sparked the rapid growth of the industry in the 1950s. The automobile helped fuel the growth of suburban living. The industry grew rapidly along with this consumer need for convenient shopping. Additional forces continued to drive convenience store growth. As grocery stores became larger and larger, they became less convenient for the customer who was in a hurry. Convenience stores filled in. Also, the increase in the number of working women reduced the amount of time available for shopping. Convenience stores began offering gasoline in US when self-serve became popular. As the industry moves towards growth, competitors are attracted by its potential and enter the market: supermarkets, mom-and-pop grocery stores, specialty food shops, drug and variety stores, vending fast food chains. Step into 1970s, convenience store operators had to cope with price and wage controls, gasoline and merchandise shortages, record inflation and interest rates, and increased competition due to longer hours and increased discounting by supermarkets. Maturity Phase As all the available customers are satisfied by the product, growth slows down and the market becomes mature. In the late 1980s, there was a continued reduction in the opening of new stores and an increase in the investment required for a new store. Industry attention moved to improve operations, margins and cost control. Rapidly changing technology area is providing new challenges and opportunities for the industry. Costs continued to go up with severe competition held back margins; more regulations were imposed, and there was an increased cost of doing business. Store labor costs were increasing due to increases in the minimum wage, more fringe benefits as well as many other factors such as adding service items like gasoline. As the number of convenience stores increased, the average number of households served by an individual store dropped. The higher level of saturation and increased competition led to fewer customers per store; therefore, stores remodeled to attract more customers rather than building new stores. The convenience store industry continued in the maturity phase; but the impact of increased competition, higher energy costs, new store expenses, and higher labor expenses reduced profits as a percentage of sales. Those companies that seek out customer needs and align themselves to serve those needs will be successful in the future. Structural drivers of change Structural drivers of change are forces likely to affect the structure of an industry, sector or market. It will be the combined effect of some of these separate factors that will be so important, rather than the factors separately. (Johnson & Scholes, 1999) 1. Issues of the law’s effectiveness: With the deregulation of many areas such as liquor license, medical supplies, travelling tickets, tours and so on, convenience stores should prepare its entry to deregulation fields. For instance, in expectation of deregulation in the sales of medical supplies, many convenience stores are preparing to entry to this field. It gives more opportunities for industry to attract more customers. 2. Offering new services: Offering new service is also a weapon for convenience stores to face the competition. Industry offers convenient services based on each neighborhood’s individual needs, including automated money orders, copiers, fax and automatic teller machines, long-distance phone cards and lottery tickets, where available. Not only does this service contribute to the increase in sales figures, but it also attracts many customers resulting in incidental shopping as well. For example, 7-Eleven in Japan sell rice and this contributes in particular to capturing the housewife bracket as a new customer type. This customer group had previously seldom shopped in the convenience store. Offering goods and services related closely to daily life enables a store to expand the base of its customers. Penetration of different industry: Competition becomes aggressive because the penetration of different industry. In the convenience retailing area, supermarket establishes their 24 hour store in some place. Convenience stores sell drug in order to attract more customer from drug store. Global players are getting into the game. Discount department stores are moving into grocery store categories. The convergence of retail competition will intensify competitive pressures and renew downward pressure on prices and margins.