Industry structure determines company profitability from "summary" of Competitive Strategy by Michael E. Porter
The structure of an industry is a powerful driver of a company's profitability. Different industries offer different levels of profit potential, and this potential is largely determined by the industry's underlying structure. In some industries, companies compete in a highly fragmented market, with numerous small players vying for market share. This fragmentation often leads to intense competition, as companies strive to differentiate themselves from their rivals. In such industries, profit margins are typically low, as companies are forced to cut prices in order to attract customers. On the other hand, some industries are dominated by a small number of large companies. These industries tend to be more profitable, as the dominant companies are able to exercise significant market power. They can set prices at a level that maximizes their profits, without fear of losing customers to competitors. In addition, dominant companies often benefit from economies of scale, which allow them to produce goods at a lower cost than t...
Similar Posts
Key resources and activities are necessary for delivering value
For a business to deliver value to its customers, it must have the right resources and perform the necessary activities. These ...
The Fallacy of Ignoring Incentives
The Fallacy of Ignoring Incentives is a common mistake made by many in analyzing economic policies. This fallacy occurs when pe...
Education is fundamental
Education is the key to unlocking human potential and fostering economic prosperity. It is fundamental to the success of indivi...
Continuously improve your products and services
As you are developing your business plan, it is essential to remember that the success of your company hinges on the quality of...
Make choices that enhance your company's competitive advantage
To win in the marketplace, a company must make deliberate choices that set it apart from competitors. These choices should be a...
Labor market influenced by corporate employment practices
The structure of the modern industrial system is such that the labor market is significantly shaped and controlled by the emplo...
Empirical evidence supports the importance of technological change
The empirical evidence unequivocally shows that technological change plays a crucial role in determining long-term economic gro...
Property rights are crucial for incentivizing investment
In a market economy, property rights play a crucial role in determining how resources are allocated, how prices are determined,...
Avoid following the crowd in investing decisions
The intelligent investor must realize that the stock market is not a game for amateurs. It is not a place to follow trends or a...
Seek to optimize the use of time and resources
To make the most of our limited time and resources, it is essential to focus on activities that will yield the greatest results...
