Industry Attractiveness

Description of Industry Attractiveness. Explanation.

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Definition Industry Attractiveness. Description.

Industry Attractiveness is the (relative) future profit potential of a market. In general it can be determined using the Five-Forces Framework as described by Michael Porter in his books Competitive Strategy and Competitive Advantage.

The profitability or return on investment of any firm is determined by:

The Industry Attractiveness, and
The (relative) Competitive Positioning within an industry.

Just as the performance of any Strategic Business Unit can be said to depend on the combination of the strength of the unit and of the industry attractiveness. Compare: BCG Matrix.

However some writers have found that these two dimensions are influencing each other in a complex way. It is even possible that an apparently weak firm can prosper in an apparently unattractive industry (Hall 1980; Hamermesh, Anderson, and Harris 1978; Woo and Cooper 1982; Wernerfeld and Montgomery 1986). In particular, the last authors argue that two very common measures of attractiveness, industry growth and average industry profitability, have contrary implications for different types of firms (Management Science, Vol. 32, No. 10 (Oct., 1986) , pp. 1223-1230). Also, industries can change and firms may develop Dynamic Capabilities to deal with that.

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End of description Industry Attractiveness. An explanation.