Industry Environment

• The industry environment is the set of factors that directly influences a firm and its competitive actions and responses.
• The interactions among the five factors determine an industry’s profitability potential; this influences the choices each firm makes about its competitive actions and responses.
• The challenge for a firm is to locate a position within an industry where it can favorably influence the five factors or where it can successfully defend itself against their influence.
• The greater a firm’s capacity to favorably influence its industry environment, the greater the likelihood it will earn above average returns.