The profitability of an industry tends to be a function of the competitive structure within the industry. The competitive structure, the amount, and the intensity of the competition within the industry are important because these factors determine the prices, costs, advertising, and the overall investment that a firm is required to make in order to compete successfully. The competitive environment in which a company operates can have a dramatic impact on its stock price. A company's long-term survival depends upon its ability to exploit its long-term sustainable competitive advantage. There are three generic competitive strategies that are used by a corporation's management in order to accomplish the firm's strategic objectives —cost leadership, differentiation, and focus.

• Cost leadership means that a firm sets out to become the low-cost producer in its industry.
• A firm implementing a differentiation strategy seeks to be unique, and the reward for that uniqueness is a premium price.
• The focus strategy has two variations. A cost focus seeks a cost advantage in the target segment, while a differentiation focus pursues differences within a target niche.