30j: Profit Margins by growth phase

CFA Level II Equities
#1

Schweser claims that Profit Margins are high during the growth phase and decrease as the business matures. Isn’t it often the other way around?

  1. When businesses first start off, they may have to tolerate low gross margins to gain market acceptance or compete for market share

  2. As a business develops, it presumably enjoys economics of scale, thus increasing gross margins and profit margins

#2

I think that they assume low competition in the growth phase because they say that the transition phase is when competition tends to lower your profit margins. Lower competition = higher profit margins.