CS Professional · Strategic Management and Corporate Finance · Analyzing the External and Internal Environment
A company analyses its industry using Porter's Five Forces. What is the primary purpose of this analysis?
The main purpose is to assess industry structure, meaning how strong the competitive forces are, and therefore how attractive and profitable the industry is. This helps a firm choose its positioning and strategy. Ranking products by share and growth belongs to the BCG matrix instead.
- ATo assess the structure of the industry and its attractiveness and profit potentialCorrect
- BTo compute the firm's internal weighted average cost of capital
- CTo rank products by market share and growth
- DTo audit statutory compliance of the firm
Explanation
The model examines competitive forces to judge how attractive an industry is and where the firm can position itself to defend against pressures. Ranking products by share and growth is the BCG matrix, and the other options are unrelated to strategy.
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