Within the strategy making context, what are the two fundamental factors that determine potential profitability?

Potential profitability can be understood only by looking at individual industries and individual companies. The two fundamental factors that determine potential profitability are:

1.       Industry structure, which determines the profitability of the average competitor, and

2.       Sustainable competitive advantage, which allows a company to outperform the average competitor.

These two underlying drivers of profitability are universal; they transcend any technology or type of business. At the same time, they vary widely by industry and company.

 well it all depends on the business for which work is done.

• but at first determine the critical success factor which would effect the  profitability.
• second do the sensitivity analysis on the factors that effect the profitabilty after that put effect control and review system on these factors.

i hope you find my answer helpful.

1- Planning and Dynamic process of preparing     business  for future as distinct.

2- Structural Analysis of Competitive Strategy due to

 rivalry between existing competitors and  diversification.

Hello

There are2 factors that determine the profit. "Net income" and "sales". The optimum sales amount should be defined upon market share and production constraints. and Net income should be increased by cutting expenses.

When setting up the strategy to achive the potential profitability, the most important items are:

1- To set up the strategy of which leads to achive the financial results that show the optimum financial model (that gives the max profitability). Those strategies shall cover the sales intake, operations, supply chain, cost control, ... etc.

2- To set up the strategy for the contingecy plans in case of any unforeseen factors affects the initial business plan.