Stages of the Industry Life Cycle | Shakeout Stage

CFA Level I Equities
#1

Hi Guys,

I am reading the (Schweser notes, 2014, p.282) and it doesn’t tell you what the level of prices are for the "Shakout Stage."

  • Embryonic Stage - High Prices
  • Growth Stage - Falling Prices
  • Shakeout Stage - ?
  • Mature Stage - Stable Prices
  • Decline Stage - Declining Prices

Would I be right in assuming prices are still continuing to fall during the shakeout stage?

#2

The intense competition in the shakeout stage would suggest to me that prices are falling.

What does the CFA curriculum say?

#3

It doesn’t say, just explains that there is slowing growth, intense competition and declining profitability.

But I’m confident if you think prices are still falling - must be right (the oracle is never wrong!)

#4

Don’t I wish!

#5

In the shakeout phase, companies usually tries to increase demand for their products by cutting prices. Quite often, this cause the industry profitability to decline (assuming that there is not enough decrease in cost to offset the decrease in price). So yes, S2000magician is 100 percent correct.

FYI: Were googling and found this old thread, just had to answer it. Hopefully someone finds it helpful.

#6

I did the same and found it very helpful. Thank you!