Business life cycle
The stages an industry passes through from emergence to decline — pioneering, growth, maturity, decline, and rarely reinvention — driven by the secular trends around it.
In plain language
Every industry has a life story. It starts small and unproven, grows fast once customers adopt it, matures as growth slows, and eventually declines as something new replaces it.
The workbook calls this the business life cycle, and lays it out as five stages: pioneering, growth, maturity, decline, and — very rarely — reinvention, where an old product finds an entirely new use and starts the cycle again.
How it works
The workbook's own worked example is call taxis in India. In the pioneering stage, around the turn of the century, the concept was unproven. Rising telephone penetration and growing consumer income drove a genuine growth stage. The industry then matured — before app-based taxi aggregators arrived and drove it into decline, displacing the older call-taxi model almost entirely.
The workbook is explicit that stage five, reinvention, is "very rare" — most industries that decline simply decline, rather than finding a new lease of life.
A worked example
Illustrative, following the workbook's call-taxi structure. A call-taxi operator is founded in the early 2000s (pioneering). Over the following decade, rising mobile phone ownership and urban incomes take its bookings from a few hundred a day to tens of thousands (growth). By the mid-2010s bookings plateau as most potential urban customers already use the service (maturity). From 2015 onward, app-based aggregators with real-time GPS matching and dynamic pricing draw customers away, and the operator's bookings fall by more than half within three years (decline) — the same displacement the workbook describes for the industry as a whole.
Why NISM asks about it
Chapter 6.5.2 (Business life cycle) sets out the five stages using the call-taxi example. Expect a question that gives an industry scenario and asks you to identify which stage it is in, or one that asks for the five stages in the correct order.
Common exam traps
- Reinvention is explicitly called "very rare." Do not treat it as a standard fifth stage every declining industry passes through — most industries in decline simply keep declining.
- The business life cycle describes an industry, not necessarily every company within it — a well-run company can still gain share even as its industry matures or declines.
Check yourself
1.Industries whose products have low income elasticity, so that a rise or fall in income does not significantly affect demand, are classified as:
- a)Deep cyclical industries
- b)Semi-cyclical industries
- c)Defensive industries
- d)Reinvention-stage industries
Show the answer
Answer: (c) Defensive industries
Defensive industries create products and services with low income elasticity, so economic cycles have minimal impact on them. The workbook names food, agricultural inputs and healthcare.
Option A is wrong: deep cyclicals such as capital goods and steel swing violently with the economic and commodity cycles. Option B is wrong: semi-cyclicals such as consumer durables do fall in a recession but retain a base level of demand. Option D is not a cyclicality category at all — reinvention and revival is the rare fifth stage of the business life cycle.
One nuance the exam likes: defensive does not mean immune. Their prospects are still affected by secular trends.
2.Indian call taxis grew rapidly through the 2000s and then shrank sharply once app-based aggregators arrived. Which two concepts does the workbook use this example to illustrate?
- a)Semi-cyclical behaviour and defensive positioning
- b)The full business life cycle, and value migration caused by a secular trend
- c)A BCG cash cow turning into a star
- d)Regulatory headwinds and taxation policy
Show the answer
Answer: (b) The full business life cycle, and value migration caused by a secular trend
The workbook uses call taxis as "one example of an industry that has gone through all the phases over a period" — pioneering at the turn of the century, growth aided by telephone penetration and rising consumer income, then decline once app-based aggregators emerged. That is the business life cycle.
The aggregators arriving is a technology-driven secular trend, and the workbook's general rule is that when a new secular trend emerges it causes value migration and often creates an inflection point in the business cycle of the affected industries.
Option A confuses cyclicality with the life cycle — cyclicality is about the economic cycle, while the life cycle is a one-way journey driven by adoption and technology. Option C misuses BCG, which classifies segments of a business by growth and cash generation, not the arc of an industry. Option D names factors the workbook does not attach to this example.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Attractive industryAn industry structure, under Porter's Five Forces, with low competition, high entry barriers and weak buyer or supplier power — letting its companies earn strong, durable margins.
- Business sectorA broad grouping of related industries serving similar economic functions — wider than a single industry but narrower than a whole economic sector such as agriculture or services.
- Customer concentration ratioThe share of a company's revenue earned from its largest customers — a high ratio signals dependence on a handful of clients who could walk away or squeeze pricing.
- Secular trendA long-term shift in how goods or services are produced or consumed, driven by technology, regulation, demographics or lifestyle — unrelated to any single year's economic cycle.
- Semi-cyclical industryAn industry whose sales grow in economic expansions and shrink in downturns, but never below a base level of demand — sitting between defensive and deep-cyclical industries.
- Defensive industryAn industry whose products have low income elasticity, so demand barely moves when incomes rise or fall — the workbook names food, agricultural inputs and healthcare.
- Deep cyclical industryAn industry whose revenues swing to extremes with the economic or commodity cycle — the workbook names capital goods and steel as its examples.