Is the Industry Attractive and What Are Its Prospects for Above-Average Profitability?
The final step of industry and competitive analysis is to use the answers to the previous six questions to draw conclusions about the relative attractiveness or unattractiveness of the industry, both near-term and long-term. Company strategists are obligated to assess the industry outlook carefully, deciding whether industry and competitive conditions present an attractive business opportunity for the company or whether the company’s growth and profit prospects are gloomy. The important factors on which to base such conclusions include:
The industry’s growth potential.
Whether competition currently permits adequate profitability and whether competitive forces will become stronger or weaker.
Whether industry profitability will be favorably or unfavorably affected by the prevailing driving forces.
The company’s competitive position in the industry and whether its position is likely to grow stronger or weaken (Being a well-entrenched leader or strongly positioned contender in an otherwise lackluster industry can still produce good profitability; however, having to fight an uphill battle against much stronger rivals can make an otherwise attractive industry unattractive.)
The company’s potential to capitalize on the vulnerabilities of weaker rivals (perhaps converting an unattractive industry situation into a potentially rewarding company opportunity).
Whether the company is able to defend against or counteract the factors that make the industry unattractive.
The degrees of risk and uncertainty in the industry’s future.
The severity of problems confronting the industry as a whole.
Whether continued participation in this industry adds importantly to the firm’s ability to be successful in other industries in which it may have business interests.
As a general proposition, if an industry ~ overall profit prospects are above average, the industry can be considered attractive; if its profit prospects are below average, it is unattractive.
The industry’s growth potential.
Whether competition currently permits adequate profitability and whether competitive forces will become stronger or weaker.
Whether industry profitability will be favorably or unfavorably affected by the prevailing driving forces.
The company’s competitive position in the industry and whether its position is likely to grow stronger or weaken (Being a well-entrenched leader or strongly positioned contender in an otherwise lackluster industry can still produce good profitability; however, having to fight an uphill battle against much stronger rivals can make an otherwise attractive industry unattractive.)
The company’s potential to capitalize on the vulnerabilities of weaker rivals (perhaps converting an unattractive industry situation into a potentially rewarding company opportunity).
Whether the company is able to defend against or counteract the factors that make the industry unattractive.
The degrees of risk and uncertainty in the industry’s future.
The severity of problems confronting the industry as a whole.
Whether continued participation in this industry adds importantly to the firm’s ability to be successful in other industries in which it may have business interests.
As a general proposition, if an industry ~ overall profit prospects are above average, the industry can be considered attractive; if its profit prospects are below average, it is unattractive.