SA2 (Short Assignment #2): FIRST, clearly identify an INDUSTRY (for example, the US fast-food industry, global auto industry, or European construction industry, etc.) For each of the 5 forces, list and discuss ALL factors that you think are important in determining the strength of each force. Comment on the industrys LTPP (long-term profit potential)

Additional Notes:

So the idea behind the 5 forces model (also known as "the industry structure model" or "Porter's 5 Forces") is this. The model essentially helps us explain why some industries are more profitable than others. For example, the retail industry, or the airline industry, has historically not been very profitable. The pharmaceuticals industry, on the other hand, has for years been very profitable. What that then implies is that COMPANIES in these industries - such as American Airlines in the airlines industry - will be relatively unprofitable or have low profits year after year. Companies such as Pfizer, or Johnson & Johnson (both in pharma) will have high profitability year after year partly because of the industry they are in.

Porter's model helps us understand these differences. His argument is that the long-term, profit potential ("LTPP") of an industry depends on the collective strength of 5 forces. If most of the 5 forces are aligned favorably, the industry (and therefore the companies in that industry) will continue to be profitable year after year. If the opposite is true, then the industry will not be profitable (and therefore the companies in it will not be very profitable).

Keep in mind the level of analysis is INDUSTRY, not COMPANIES, though the implication is for companies. Your response should be in about 750 words total.