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Competing For Advantage
Part II – Strategic Analysis
Chapter 3 – The External Environment:
Opportunities, Threats, Industry Competition,
and Competitor Analysis
Each of these forces affect costs/prices,
(of firms in
Porter’s 5-forces is all about margins
What factors increase/decrease margins within an industry, thus affecting profitability.
When industry structural variables are weak…...
Prices can be kept high
Profits can soar
Costs can be kept low
When industry structural variables are strong
Prices will be pushed down
Costs will rise
… in a week
… in 2 months
… in 1 year
What kind of businesses might you start?
Carbonated Soft Drink
Which segment is more attractive? Why?
The ways in which competitive analysis provides insight into the attractiveness of an industry by determining its potential for above-average returns over the long term