Michael Porter's Five Forces is the canonical framework for understanding why some industries are structurally profitable and others aren't. Published in 1980 in the book Competitive Strategy, the framework remains the standard tool MBA programs and management consultants use to analyze industry attractiveness. The premise: the industry you're in determines 60-70% of the long-run profitability outcome, and individual company strategy explains the rest.

Before analyzing a company, analyze its industry — because even brilliant management in a structurally bad industry typically produces mediocre results. (1) Rivalry among existing competitors — how aggressively they compete on price and features. (2) Threat of new entrants — how easy it is for new firms to enter.

(3) Bargaining power of suppliers — how concentrated and powerful the supply chain is. (4) Bargaining power of buyers — how concentrated and price-sensitive the customer base is.