What is industry structure vs relative position?

• A. Industry structure explains average profitability, while relative position explains why some firms outperform others.
• B. Industry structure and relative position are identical.
• C. Industry structure describes customer preferences.
• D. Relative position determines supplier power.

Answer: (A)

Understanding the difference between industry structure and relative position helps explain why some firms do better than others in the same market. Industry structure refers to the external forces that shape profitability for all players in the industry—the competitive intensity, the threat of new entrants, the power of suppliers and buyers, and the availability of substitutes. These structural factors set the average profitability ceiling across the whole industry. Relative position, on the other hand, is about how a particular firm competes within that field—itscosts, differentiation, access to resources, distribution or brand strength, and other firm-specific advantages. Because firms can adopt different strategies and realize different efficiencies, some will earn above-average returns while others stay near the average. So the statement that industry structure explains average profitability while relative position explains why some firms outperform others best captures the distinction.