Definition
A mature industry is a sector of the economy where business growth has slowed or leveled off. Companies within such industries have typically been established for a longer period and focus more on dividends and stability, rather than rapid growth or expansion. The mature industry stage is characterised by saturated markets, increased competition, and relatively stable market shares among companies.
Phonetic
The phonetic spelling of the keyword “Mature Industry” in International Phonetic Alphabet (IPA) standard would be /məˈtʃʊr ˈɪndəstri/.
Key Takeaways
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- Stable Growth Rates: Mature industries are characterized by stable and predictable growth rates. These industries have passed the initial high-growth period and have settled into a pattern of steady, consistent growth. They are less risky for investors and offer steady returns.
- Increased Competition: Mature industries are typically marked by increased competition. This is because as an industry matures, it becomes more saturated with businesses vying for the same customer base. Therefore, companies within mature industries often have to compete on aspects other than price, such as quality, service, and innovation.
- Higher Barriers to Entry: Mature industries often have higher barriers to entry than newer, growing industries. The established players in these industries typically have significant resources and market share, making it difficult for new entrants to compete. This can lead to a consolidation phase where smaller companies are bought out or driven out of business by the larger, more established companies.
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Importance
The business and finance term ‘Mature Industry’ is important because it refers to an industry that has reached a stage of its lifecycle where growth has slowed or come to a halt. Businesses operating within a mature industry face unique challenges and opportunities regarding innovation, competition, and market saturation. Companies within these industries, like those in the auto industry or consumer packaged goods, may need to focus on efficiency and cost reduction, streamlining operations, or investing in innovation to maintain or gain market share. Understanding the concept of a ‘mature industry’ can help businesses to strategize more effectively, adjust their market position, and plan for future growth or consolidation.
Explanation
Mature industries play a crucial role in the financial and economic environment, particularly in providing stability and predictability. A mature industry is one that has passed the initial high-growth phase common in emerging markets and is now exhibiting lower, more stable growth rates. Businesses in mature industries play an integral role in many investment strategies, as they often yield stable profits and provide consistent dividends to shareholders, thereby creating a consistent stream of income. This makes them especially valuable for conservative investors looking for less risk and reliable returns over the long term.Furthermore, mature industries can offer a wealth of opportunities for businesses operating within them. Since these industries often produce essential, widely-used products or services, companies can focus on enhancing their efficiency, improving their existing offerings, or creating new, complementary services to stay competitive. Additionally, businesses can leverage their position in a mature industry to predict future market behaviors and trends more accurately, making strategic planning and forecasting easier. Thus, mature industries serve as a foundation for economic stability and offer significant prospects for both low-risk investors and the businesses within them.
Examples
1. Automobile Industry: Automobile production has been around for over a century. It could be considered a mature industry because it has maintained stable market demand and supply for decades, functioning at a steady growth rate. Major companies like Ford, General Motors, Toyota, and Volkswagen have well-established production and distribution systems, and innovation primarily comes in the form of incremental improvements to existing technology.2. Oil and Gas Industry: The oil and gas industry has been established for many years, supplying a significant proportion of the world’s energy needs. This industry has achieved consistent growth and production levels, making it a mature industry. Companies in this sector such as ExxonMobil, Chevron, and BP are widely recognized and operate on a global scale.3. Banking Industry: Banks have been around for a very long time and the industry is highly regulated. The products and services offered by most retail banks are similar, and the industry is not experiencing high growth. Major players in the industry such as JP Morgan Chase, Bank of America, and Wells Fargo have expansive networks and offer very similar services, reflecting characteristics of a mature industry.
Frequently Asked Questions(FAQ)
What is a Mature Industry?
A Mature Industry refers to an industry that has reached a stage of slowdown in growth because it has been fully developed and saturated in the market. It’s a sector that has achieved widespread consumer acceptance and stable revenues.
What are the characteristics of a Mature Industry?
Some of the primary characteristics include slower growth rate, high market saturation, intense competition, price-based competitions, increased mergers and acquisitions, and lack of significant innovation or change in the products or services offered.
Can a company within a Mature Industry still achieve growth?
Yes, companies within a Mature Industry can achieve growth through diversification, acquisitions, innovation, increasing operational efficiency, or reaching untapped markets.
Does a Mature Industry mean slower profits for businesses?
Not necessarily. Even though Mature Industries tend to experience slower growth, companies with efficient operations and a solid customer base can maintain steady and healthy profits.
What is the difference between a Mature Industry and an Emerging Industry?
An Emerging Industry is a sector of the economy that is still in its early stages, offering new goods or services, and experiencing rapid growth. In contrast, a Mature Industry is fully developed and shows little to no signs of rapid changes or growth.
What are some examples of Mature Industries?
Traditional manufacturing sectors like automobile and steel production, and service industries like banking and insurance are examples of Mature Industries.
What strategies do companies in Mature Industries implement?
To remain competitive, companies in Mature Industries may implement a variety of strategies, including cost leadership, differentiation, mergers and acquisitions, tapping into new markets, and improving operational efficiency.
Can a Mature Industry regress into a Declining Industry?
Yes, if a Mature Industry fails in innovation or keeping up with changes in market demand and trends, it may regress into a Declining Industry.
How does a Mature Industry affect investors?
Investment in Mature Industries is often considered less risky as the markets are well-established and predictable. However, the potential for high growth is typically lower than that in Emerging Industries.
Related Finance Terms
- Market Saturation
- Slow Growth Rate
- High Competition
- Stable Profit Margins
- Consolidation
Sources for More Information
