Laggard industry definition

What is a Laggard Industry?

A laggard industry is a market niche that is growing at a reduced rate from the general economy or shrinking. There are numerous reasons for this behavior, including the following:

  • Technological change. The impact of technology can rapidly shrink an industry. For example, the incorporation of lights into smart phones greatly reduced the sale of flashlights.

  • Shifting of work to a lower-cost country. Costs may be substantially lower in other countries; this typically refers to the shifting of work to countries with lower labor costs. Thus, the garment industry has moved to Central America, Bangladesh, and other locations.

  • Competition from adjacent niches. Businesses in an adjacent market may steal sales from an industry. For example, online sales from Amazon have ravaged any number of retail stores.

  • The negative effects of tax laws. Whenever tax laws no longer support an industry, its cost advantage declines. Thus, when tariffs are removed from incoming foreign products, protected industries in the host country inevitably face increased pricing pressure.

A business operating within a laggard industry needs to be especially careful in controlling costs, since its revenues are more likely to be declining.

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