What Can a Firm Do in a Declining Industry

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The Answer is A declining industry exhibits generally excess capacity, lack of technical change, a declining number of competitors, a high average age of resources, and strong price competition.
Two factors determine the intensity of competition in a declining industry: the balance between capacity and output, and the demand for the product. The adjustment of capacity to demand is itself determined by three elements: the predictability of decline, barriers to exit, and the strategies of the surviving firms.
Four strategies are identified by Harrigan and Porter for declining industries:
1-Leadership
Showing commitment to the industry, acquiring rivals, helping competitors to exit, and providing pessimistic forecasts, are ways to play a dominant role in that industry
2-Niche
Identifying a niche where demand is stable, where demand is inelastic, and that other firms are not likely to invade. Then, playing a dominant role in that niche allows firms to reap profits.
3-Harvest
This strategy involves the maximization of a firm's cash flows from its existing assets, while avoiding further investment.
4-Divest
Divesting before the decline of an industry will allow the firm to sell its assets.

What Can a Firm Do in a Declining Industry

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