List and explain the various stages of the growth cycle of an industry. Also discuss the merit of investing in the industry during each of the various stages
What will be an ideal response?
Answer: The 4 stages of the growth cycle are
1. initial development stage—the industry is new and untried; investment opportunities are not available to most investors; risks are high;
2. rapid expansion stage—product acceptance is spreading and investors can foresee the industry's future; economic variables don't have a large effect on the industry's performance; good time to invest in company;
3. mature growth—heavily influenced by economic development; expansion comes from the economy's growth; may provide defensive, cyclical or current income types of investment opportunities;
4. stability or decline—demand for the industry's products is diminishing; investment opportunities are few.
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