Industry Attractiveness

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Industry Attractiveness

By | August 2009
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When assessing whether an industry has long-term attractiveness, there are many important factors that must be evaluated. The first is the industry’s potential for growth. If the industry doesn’t have a good growth potential it may not be profitable for very long or the competition may be too fierce for the market potential. If competitive forces are squeezing industry profitability to inadequate levels and if the competition appears destined to grow stronger, the industry will be less attractive. If competition appears that it may grow weaker, then it will be more attractive. The prevailing driving forces also have an effect on long-term attractiveness. These conditions all come with risk and uncertainty. The degree of risk and uncertainty will also play a factor when determining these conditions. The possibility of the industry facing severe problems-regulatory or environmental issues, stagnating buyer demand, industry overcapacity, mounting competition etc. also affects the outlook. The company must evaluate where they stand in the market against their competitors. Being a leader may present good profitability but if the company appears like it will be facing a steep uphill battle, success may not be promising. If the company is able to capitalize on the vulnerabilities of rivals or reverse an unattractive industry into a rewarding opportunity, the industry will look more attractive. The competitive strength of the company to defend or counteract the factors that make an industry attractive will also play an important role. If the participation of a company in a certain industry affects the ability to be successful in another, it is usually a good idea to continue participating in that market.
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