2.4. Market profitability analysis. According to Porter (1985), the attractiveness of a market or an industry is measured by the long-term return on investment of the average firm. This in turn depends on five factors that influence profitability: the intensity of competition, the existence of potential competitors who will enter if profits are high, substitute products that will attract customers if prices become high, the bargaining power of customers and suppliers. Competitors: The intensity of competition from exiting competitors will depend on several factors, including: the number of competitors , their relative size
whether or not their product offerings and strategies are similar, the existence of high fixed costs, the commitment of competitors. As a first approximation, the more competitors there are, then the more competitive intensity exists. However, the nature of the competitors can have a sizeable impact. The relative size of the competitors will affect the competitive intensity. If a market is dominated by a few firms of equal size then the market is likely to be highly competitive. Potential competitors: Barriers to entry obviously act to encourage or to deter potential entrants to a market. In projecting the level of competitive activity in a market, an understanding of the relevant barriers to entry is important. The following are the main barriers to entry to consider:capital investment required
economies of scale—in production and promotion, distribution channels—the cost of gaining distribution can be difficult and costly
product differentiation—established firms may have high levels of customer loyalty produced by protected product features, a brand name and image, customer service and established and accepted promotion methods.Substitute products: comprise those sets of products that are identified as competing with less intensity than the primary competitors. They are still relevant, however, and can influence the profitability of the market and can in fact be a major threat. Substitutes that show a steady improvement in relative price/performance and for which the customer’s cost of switching is minimal are of particular interest. Customer power: When customers have relatively more power than sellers, they can force prices down or demand more services and therefore influence profitability. A customer’s power will be greater when their purchase size is a large proportion of the seller’s business, when alternative suppliers are available and when the customer can integrate backward and make all or part of the product. Supplier power: When the supplier industry is concentrated and sells to a variety of customers in diverse markets, it will have a relative power that can be used to influence prices. Power will also be enhanced when the cost to the customers of switching suppliers is high.
2.5. Key success factors: bases of competition
These are assets and skills that provide the basis for competing successfully. There are two types: strategic necessities—if these are absent then they will create a substantial weaknes. strategic strengths—those at which the firm excels and are assets or skills that are superior to those of the competition.They can provide a competitive advantage.Key success factors differ by industry in a more or less predictable way.2.5.2. Efficiency analysis. The efficiency is the relationship between operative spends (salaries, rents, etc.) needs for obtaining a benefit after developing the production. It is clear that if it is possible to obtain same production and sales levels reducing fix cost structure, the company will appear as most efficient and profitable for stakeholders. Other different way or approaching is just developing and increasing sales with exactly the same structure. But now it is necessary to understand what is referring about the concept of ‘structure’ so it is linked with all the resources necessaries for developing the sale levels. For measuring some of this processes they exists some indicators: Sales Force Efficiency. Main objective is optimize the routes just obtaining better return by visit (to clients). Some variables measured in this sense are: average number of visits per salesman by day, average incomes by visit executed, average spent by visit executed. 
Cost of Sales Force Team as a percentage of total Revenues.Publicity Efficiency. There is a great difficulty for measuring the return of the investment dedicated to publicity but most of the companies agreed in their necessity. The difficulty is set about the direct incomes generated by the commercial impact and isolating them from other factors (point of sales, loyalty, promotions, etc.). Some of main indicators to estimate its return are:  Publicity cost per each 1,000 impacts of targetted public
% of Total Audience impacted by mass media campaign developed by the company. Measurements about attitude, behaviour changes and product acknowledgment before and after the commercial and communication campaigns. Promotion Efficiency. (It will be analyzed properly further in this course) Distribution Efficiency. Just to reduce and making more efficient commercialization cost, the company must consider next aspects: (it will affect to Cash-Flow levels) Reduction and Control of Stocks and Inventories levels without affecting service outcomes to clients. 
Increase range of products inside of the distributors (increase number of SKUS by client). Optimize delivery services and routes (Logistic improvement) Sharing Logistic Platforms with other companies or outsourcing some more efficient services for specialized companies. 
In short term, markets could be perceived as static but when approaching strategically, with long-term vision, the same market appears to be very different in structure, competitors and value offers and only resists companies that accept this changes or take profit about main opportunities and consumer trends. The way to analyze market evolution and being inside of a market is called “strategic windows” analysis.
Strategic Windows (defined by Abell, 1978): There are only limited periods in which  the fit between the key requirements of a market and a particular firm’s competencies match and becomes and optimum for investment plans. It depends on the investment (economic and financial) capabilities and flexibility about dealing changes (consider internal and external barriers). These strategic windows arise as a result of market evolution (detected by 5 Porter’s five forces). Markets are not static or unchanging entities so change substantially in nature over time, as follow:
The development of new primary demand. The emergence of new competitive technologies which cannibalize existing ones.
Market redefinition, Channel or Distribution patterns changes
Markets “de-regulation”,Impact of substitutive products