The industry attractiveness test can be viewed as the means of measuring the opportunities that an organization may pursue in the target environment. The tool can be positioned as a crucial component of the preparations for entering a specific market or business area since it points to the chances for growth that a firm may enjoy. Although the industry attractiveness test does not prevent every possible unexpected issue from occurring, it, nevertheless, provides a detailed overview of the industry and points to the obstacles that a firm may encounter when integrating into the identified environment. Therefore, the tool can be considered an indispensable element of the industry analysis and a crucial step in determining the possibility of success for a particular organization and its products or services among the identified customers.
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It is remarkable that, apart from a general assessment of the crucial elements of the industry, the tool in question serves as a perfect method for determining possible risks that a firm may have to address in a specific area. The industry uncertainty rates, which the test shows in a very explicit manner, provide a foil for the decision-making process in the course of which the reasonability of entering the industry will be determined. The success of the industry attractiveness test as a tool can be attributed to its comprehensive qualities; for instance, it helps define the essential characteristics of the market in which a firm plans to diversify by incorporating the findings of the Porter’s Five Forces analysis, the PESTLE assessment outcomes, the evaluation of the market size, etc. While the array of devices included in the assessment tool may imply that the procedure is going to take an impressive amount of time, the ability of the test to embrace the crucial factors that define the success of the entrepreneurship in the required area is worth appreciation (Thompson, Strickland, & Gamble, 2014).
Herein the relevance of the test lies. Enveloping economic, political, legal, technological, and environmental aspects of the market, detecting the demand and supply rates, and providing quantitative results that can be easily interpreted by the company managers, the assessment serves as the foil for designing a competitive strategy for any organization. The outcomes of the test point to the aspects of the company’s operations that require further improvement, as well as indicate the directions which the design of the competitive advantage of the organization may take. Consequently, the prerequisites for a successful promotion campaign and the attraction of the target audience can be created (Mullins, 2013).
It would be wrong to believe that the industry attractiveness test is the silver bullet against making mistakes when assessing the company’s chances to enter a specific market and become a part of a certain industry. Unless a sustainable approach toward resources management and a coherent quality management strategy are designed, a company is unlikely to build the necessary competitive advantage and operate in the market successfully. However, the test sheds light on the risks that a company is likely to face when becoming a part of the chosen industry. As a result, the opportunities for building an efficient risk management strategy or reconsidering the area of the firm’s competencies are created. Therefore, the use of the tool must be encouraged and promoted widely among SMEs and large companies worldwide.
Mullins, J. (2013). The new business road test: What entrepreneurs and executives should do before launching a lean start-up. London, UK: Pearson UK.
Thompson, A., Strickland, M., & Gamble, J. (2014). Crafting & executing strategy: The quest for competitive advantage: Concepts and cases (19th ed.). New York, NY: McGraw-Hill Education.