In 1979, Michael Porter created the definitive framework for analyzing an industry's profitability. Amateurs think competition is just about rival companies. Porter proved that profitability is driven by Five Forces:

1. Rivalry Among Existing Competitors: Are there a lot of competitors fighting a brutal price war?

2. Threat of New Entrants: Is it easy for a startup to enter this industry? (A software app is easy; a commercial airline is incredibly hard).

3. Threat of Substitutes: Can the customer solve their problem a completely different way? (Zoom is a substitute for Delta Airlines business travel).

4. Bargaining Power of Suppliers: If there is only one company that makes the microchips you need, they can charge you whatever they want, eating your profits.

5. Bargaining Power of Buyers: If customers can easily compare prices and switch, they will force your prices down.