Industrial Profitability

There is a vast body of research in industrial organization on the influence of industry structure on profitability. Strategy literature suggests that the average profitability of an industry is influenced by five forces which are: (1) rivalry among existing firms, (2) threat of new entrants, (3) threat of substitute products, (4) bargaining power of buyers and (5) bargaining power of suppliers. According to these forces, the intensity of competition determines the potential for creating abnormal profits by the firms in an industry.
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