Why is understanding industry structure important for firms?

Question: Why is understanding industry structure important for firms?

  • Industry forces are constantly changing.
  • Firms cannot earn economic rents in industries with one or more strong competitive forces.
  • Firms can position themselves to minimize the threats posed by competitive forces.
  • Industry-level factors explain the bulk of the profit differences among firms in the US economy.

Answers: Firms can position themselves to minimize the threats posed by competitive forces.

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