Industry Bubble
Part One
An industry bubble is an economic cycle that exists in an industry. In industries where there is a bubble, the industry is characterized by a rapid expansion which is followed by a contraction. The rapid expansion sees new players entering to venture in the industry with new firms beginning to startup businesses in the industry. The rapid expansion of the industry leads to saturation and the industry becomes too big and bursts just like any other bubble. The bursting is a contraction as there are limited revenues from the industry after the burst. The industry shrinks as many people get retrenched and firms fall out of the industry.
There are many previous industries that can be said to have experienced industry bubbles. One such industry is the dot-com bubble. Back in 2000, the industry was doing digital advertisements and the revenues boomed up to reach $1.95 billion. The growth represented a 182% growth in profits from the previous year’s revenues. However, fast forward to the second quarter of 2000, the revenues in the industry started falling. The effect of the falling revenues was felt throughout the industry and the reaction told it all. Many publishers and advertisers shut down or retrenched as the industry underwent a contraction that was unexpected. Market capitalization and revenues went down and shrank rapidly. Another industry that experienced an industry bubble is the real estate industry. The rationale behind the proneness of the industry is associated to the actuality that banks and other government regulation that is put in place makes the funding for the industry easily accessible to all . The accessibility of funding leads to saturation in the industry with many players coming in and building their houses for sale. The latest real estate industry bubble occurred before the great recession where players suffered immense losses and lost much in capital and investments.
In the apps industry, there is the potential of an industrial bubble. There are various rationales that can be cited to help support this proposition. Firstly, apps do not engender any revenues for the developers. The reality of the matter is for an app’s developer to breakeven and gets the profit for his application in the current setting; he or she has to wait for a long time. The rationale is that there are numerous apps and the mobile phone operators have developed free applications that compete with the ones available for sale. This makes it hard for the industry to generate revenues that would maintain the existing firms on a profitability level. Another actuality that makes the app industry prone to a bubble is the competition that exists in the industry. The app industry is highly dominated and due to the dynamism of technology, apps are developed on a day-to-day basis. The ever changing environment for business makes it hard for a company to hold up if it is offering applications that are outdated or surpassed by time. Some of these firms that were previously profitable will turn into making losses and this will lead to a contraction in the market.
The mobile app industry can also be seen to have an industry bubble if proper control is not put in place. The trend in place is similar to that which led to the industrial bubble of real estate industry. Many banks are now willing to sponsor and fund ideas and concepts from apps developers that will make them have enough capital to materialize the concepts. This will lead to saturation and many people will be left repaying loans from the little income they receive from the sale of applications. If this happens, there will be an industrial bubble in the apps industry.
The apps industry is not a viable start-up place for a person wishing to start a business. The underlying principle is that this industry is not very profitable and would not provide the income required to fund expansion . In addition, the technological changes expected in the future will see firms in the mobile industry hire app developers who will be tasked with developing new apps. This may end up driving out independent app developers who are freelancers and who are in the business freely. Therefore, the apps industry is not good for business as the industry has a bleak future in profits generation.
Part Two
One business idea that would be viable to initiate would be in the industry of web designing. The industry is not saturated and it needs experts to do the work. The whole idea will be to design websites for businesses and companies that have web portals and that would wish to market themselves through the internet. In addition, small businesses that wish to have websites where customers can get them will get websites to solve their publicity issues. The payments will depend on the amount of information and graphics required to complete the setting. There are various things that one needs to know about the market of the business idea.
One needs to understand who the target customers are in the market. A reconnaissance on all businesses and companies that do not have web portals should be done to ascertain the target market. In addition, before such a business can be finalized and started, the prices charged by the existing firms who offer the service in the market should be put into analysis. This will help ascertain the profitability levels that the new entrant is expected to get in the market. The level of competition should be ascertained to ensure that one knows how many firms and people have the business idea that he has. Moreover, the level of competition in the market will influence the market penetration strategy and pricing of the new entrant. The data collection methods that will be used to collect this information may include interviews on the company executives or questionnaires.
There are various other aspects that a new entrant in the market needs to know about the industry. The industry includes the firms already present and the rules and regulations that are set by the government and unions. The new entrant needs to understand the tax rates and all other charges that a firm is required to pay so as to be allowed to operate in the market. These will include licenses and work permits. In addition, the new entrant should know the life span of firms that enter the industry. This includes the limitations and challenges that they face that ultimately lead to their exit from the industry. All this information will be useful to the new entrant in the industry as it will provide him with the necessary skills that he or she needs to concur and triumph in the industry. Data can be collected through interviews of existing firms.
The primary data collection methods which include interviews and questionnaires can be used to collect the data as they are accurate in data collection . They will be critical in the analysis and should be used by the researcher to know details about the market and the industry. Secondary methods of data collection will also be used from publications and newspapers. This will be critical in helping the new entrant understand the challenges in the market and industry.
Works Cited
Cline, Josh. "Mobile Apps: A return to the 1900s High-Tech Bubble." The Cline Group (2013): 1-4.
Colombo, Jesee. "The Social Media Bubble." The Bubble Bubble (2014): 1-3.
Data Collection Services.net. Primary and Secondary Data Collection. 15 October 2014. 15 October 2014 <http://www.datacollectionservices.net/our-data-collection-services/primary-and-secondary-data-collection/>.
