Explain why an industry is profitable — or isn't — before you commit to competing in it.
Use when Use it before entering an industry, before a major capital commitment, or when strong execution is somehow producing weak margins and you need to know whether the problem is you or the structure you are operating inside.
Avoid when Avoid it for short-term or tactical calls — it describes structure, which moves over years. It fits industries with recognisable boundaries better than fluid ecosystems and platforms, where roles blur and today's supplier is next year's competitor. It also says nothing about your own capabilities, and it is a snapshot of a structure that will keep moving after you present it.
Compete somewhere else: redraw the offer so the current rivalry stops being the question.
Use when Use it in a commoditised market where competitors are near-indistinguishable and margins are eroding, or when a large population plainly declines to buy from anyone in the category and you want to know why.
Avoid when Avoid it in a young market where the rules are not yet settled — there is no convergence to escape. Be wary of it as a rationalisation: 'we compete differently' is the most comfortable thing a losing company can tell itself, and the framework supplies attractive language for it. The literature also selects heavily on winners, so the base rate for this working is far lower than the case studies imply.