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Essay On Industry Attractiveness

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Industry attractiveness and structure has a strong influence on company performance. To determine the attractiveness, one needs to conduct an analysis to identify the threats and opportunities and to focus resources on developing unique capabilities that could lead to competitive advantage.
The essence of competitive strategy for a company is to find a position in its industry where it can best cope with Porters Five Forces or can influence them in its favour. Once the forces (suppliers, buyers, substitutes, potential entrants and rivalry), and their underlying drivers have been diagnosed, a company is in a position to identify its strengths and weaknesses relative to the industry norms (Grant, 2013). This helps a company’s positioning so that its capabilities provide the best defense against the existing array of competitive forces, influence the balance of the forces or anticipate and respond to shifts in competitive balance before rivals recognise it. Not all industries have equal potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces of competition differs. High growth industries tend to present better growth opportunities. Successful fast-growth businesses scan the environment to identify new threats as they emerge, taking a broad view of internal and external risk issues. Slow growth industries lead to an intense competition for market share, price competition, advertising battles, and hence reduced profitability.
The basic premise that underlies industry analysis is that the level of profitability is neither random nor the result of entirely industry-specific influences: it is determined by the systematic influences in the structure. When examining industry attractiv...

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...e the online gambling website of choice attracting younger tech savvy consumers. Resulting from a merger with a competitor, Betfair reduced the number of online rivals and went on to dominate the space overcoming up to 40 rival start ups.
Honda took the approach of moving into the US market and created a transformational change, where it was not a direct rival to the incumbent industry since Honda were not interested the larger ‘hogs’. Instead, they created a new market within the overall motorcycle industry with their small motorcycle. Thereby, they were able to gain share in an industry that had not existed previously.
In a world of more open competition and relentless change, it is more important than ever to reflect on industry structure and how to influence it. Influencing the structure helps create competitive advantage and increases industry attractiveness.
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