What typically happens during the shake-out phase of the business life cycle?

During the shake-out phase of the business life cycle, the focus is on the changes that occur as the market becomes saturated and competitive dynamics shift. At this stage, many businesses have established themselves, and the rapid growth that characterized the initial phases of the life cycle starts to wane. Companies begin to realize that the market cannot sustain all entrants, leading to intensified competition. This often results in slower growth as excess supply meets limited demand, causing challenges for profit sustainability.

In this scenario, companies may need to consolidate, improve efficiency, or innovate to maintain their market positions. The shake-out phase is marked by businesses understanding that the initial high growth rates will not continue indefinitely and adjusting their strategies accordingly. This understanding of market saturation and its impact on growth is crucial for navigating the complexities of a maturing market.