Mature Markets: Definition & Examples

Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and a PhD in Higher Education Administration.

As industries develop and change, they go through phases of a lifecycle. In this lesson, we'll discuss what it means when industries become mature markets and provide some examples of these industries.

The Industry Lifecycle

New products and services are developed by companies every day, but occasionally, a whole new market is born. Think of the auto industry in the early-1900s, or the computer industry in the 1980s. Every industry you can think of, at some point in history, was a new market.

Just like individual products, these markets go through a lifecycle. Depending on the nature of products and the market, they go through the stages of these lifecycles at different speeds, but they go through each stage. These stages are startup, growth, maturity, and decline. For this lesson, let's focus on the maturity stage.

Mature Markets

Before a market reaches maturity, it goes through the growth stage. During the growth stage, new companies are coming into the market, demand by consumers is increasing, and profits are growing. Supply and demand is in the producer's favor. But, eventually the market begins to saturate and supply and demand softens. Perhaps new products have been innovated or maybe most of the new customers to find have been found. As growth slows, the market reaches maturity.

A mature market is the stage where the rate of growth slows, perhaps to zero. Because there is little growth, companies in the industry end up with excess inventory and/or capacity. This can often lead to pressure on profits, as companies discount prices to get rid of their excess capacity. Whether those price drops lead to a price war or companies shutting their doors, competition increases and becomes very intense. Competition in mature markets is typically based on price, not on product differentiation.

While growth is slowing in a mature market, the market is still growing - just at a decreasing rate. For example, maybe last year the market for laptop computers grew at 6%, and this year the market grows at 4%. The market is still growing - at 4% - but it isn't growing as fast as it was. When the market actually starts to shrink, it is transitioning from the mature phase to the decline phase.

Threats of Mature Markets on Companies

As a market transitions from the growth stage to the mature stage, there are a number of strategic mistakes that companies make. The most common is simply not anticipating the change from operating in a growth market to a mature market. Pricing strategies, optimal production levels, and marketing are very different in a mature market than they are in a growth market, and pursuing a growth strategy in a mature market can be very costly.

Often, the next strategic mistake made by companies is to assume whatever advantage helped them succeed in the growth phase will help them maintain market share in the mature phase. Again, this is usually not the case. If their competitive advantage was being a low-cost leader, then as other firms lower their prices, they lose their edge. If a firm pursued a luxury strategy, then as consumers focus on lower cost, less differentiated products, that firm loses. It's critical, when operating in a mature market, to recognize what consumers want and offer exactly that, with minor variation.

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