I recently studied a method invented by Michael Porter, PhD, to evaluate the attractiveness of an industry and decided to apply the method to measure the “attractiveness” of the EDA industry.
Michael Porter is the Bishop William Lawrence University Professor at Harvard Business School and the director of the school’s Institute for Strategy and Competitiveness, which was founded in 2001 to further his work and research.
Porter's five forces analysis is a framework for analyzing the level of competition within an industry and business strategy development. It draws upon industrial organization economics to derive five forces that determine the competitive intensity and therefore the attractiveness of an industry. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit. Normal profit is the profit that is necessary to cover the opportunity costs of the firm's investors. In the absence of this, investors would withdraw funds and use them to better advantage elsewhere.
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