Industry Attractiveness

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What is Industry Attractiveness? Meaning.

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:

  1. The Industry Attractiveness, and

  2. 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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🔥 NEW International Industry Attractiveness: Tourism Industry
Another level at which we can analyze industry attractiveness is comparing one national industry with the same one in other countries. For example, amongst the Middle East countries Iran has the high...
Measuring Industry Attractiveness
How can Industry Attractiveness be measured? What are the measures we can use?...

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Expert Tips

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Innovating by Reconsidering Value Delivery

Fundamental Innovation
When innovating their business model, companies need to reconsider their value proposition from all perspectives. One of...
Information Sources

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Preparing a Feasibility Study

Feasibility Analysis
This presentation gives an introduction into the concept of idea/business feasibility studies. The presentation consists...

Interview Porter: How to Apply the Five Forces Framework?

Applying the 5 Forces for Fundamental Industry Analysis
Interview Michael E. Porter, Professor at Harvard University on The Five Competitive Forces That Shape Strategy. Topics:...

Strategic Group Mapping

Strategic Group Analysis, Competitive Analysis, Analyzing Strategic Competitors
Good introduction into strategic group mapping....

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Compare with: McKinsey Matrix  |  ADL Matrix  |  Business Models  |  Competitive Environment  |  Competitive Position  |  Disintermediation  |  Strategic Fit  |  Oligopoly  |  Barriers to Entry  |  Market Segmentation  |  Emerging Markets  |  Factor Endowments  |  Feasibility Study  |  Macro-Environment  |  Product/Market Grid  |  Three Dimensional Business Definition  |  Rule of Three  |  Core Competence  |  Profit Pools  |  Product Life Cycle  |  Blue Ocean Strategy


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