This thinking developed out of Industrial Organisation

This thinking developed out of Industrial Organisation (IO) theory in which market structure was seen as largely determining strategic conduct (strategy), which in turn was largely instrumental in determining performance.
A strong competitive force presents the company with a threat to its position because it depresses profit margins. A weak competitive force on the other hand offers an opportunity to raise margins. There are a number of macro-environmental influences upon these competitive forces, such as political and legal, technological, macro-economic, and social and cultural factors. These are beyond the control of the company. Despite this, the changes they occasion in the relative strengths and weaknesses of the five competitive forces require an adaptive response on the part of the firm


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