What analysis method is used to evaluate industry attractiveness?

Porter's 6 Forces framework is specifically designed to evaluate the attractiveness of an industry by analyzing the competitive forces that shape the environment in which companies operate. This method takes into account the five competitive forces—threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and industry rivalry—along with a sixth force, which can vary based on the context, such as the influence of complementary products or other external factors.

By assessing these forces, businesses can understand the dynamics of the industry, identify potential challenges and opportunities, and determine the overall potential for profitability. This analysis provides insights into how secure the industry's presence is, how much competition there is, and what barriers to entry exist. Consequently, using Porter's 6 Forces helps stakeholders make informed strategic decisions regarding investment and business strategy.

In contrast, other methods have different focuses. SWOT Analysis centers on a company's internal strengths and weaknesses alongside external opportunities and threats. PEST Analysis examines the macro-environmental factors (Political, Economic, Social, and Technological) that could affect the industry, but does not focus specifically on competitive dynamics. Financial Ratio Analysis, on the other hand, assesses a company's financial health and performance indicators but does not evaluate the industry's inherent