As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. A clear example of this is the airline industry. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average.
The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information.
They consist of those forces close to a company that affect its ability to serve its customers and make a profit. Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. Three of Porter's five forces refer to competition from external sources. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. Attractiveness in this context refers to the overall industry profitability. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. "Porter five forces analysis is a framework for industry analysis and business strategy development.
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