As an industry enters the shakeout stage:
A) rivalry among companies declines.
B) demand grows at a high rate.
C) prices of products increase.
D) excess productive capacity emerges.
E) new entrants come into the market.

Question

Quizplus · Accepted Answer

Excess productive capacity emerges during the shakeout stage, as weaker firms start to exit the industry. This leads to firms having more capacity than is necessary to meet demand, which can result in price cuts and intense competition. Rivalry among companies actually increases during this stage as surviving firms try to capture market share from exiting competitors. Demand may continue to grow, but at a slower rate than during the growth or maturity stage. New entrants are discouraged from joining the market due to the high level of competition and difficulties in establishing a foothold in the industry. Prices may remain stable or decrease as firms compete for customers.

As an Industry Enters the Shakeout Stage