{"id":1958,"date":"2019-09-27T13:33:00","date_gmt":"2019-09-27T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=1958"},"modified":"2026-01-09T10:23:49","modified_gmt":"2026-01-09T10:23:49","slug":"factors-influence-industry-growth-profitability-risk","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/equity\/factors-influence-industry-growth-profitability-risk\/","title":{"rendered":"Factors that Influence Industry Growth, Profitability, and Risk"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Introduction to Industry and Company Analysis (2025 Level I CFA\u00ae Exam \u2013 Equity \u2013 Module 5)\",\n  \"description\": \"This video lesson covers industry and company analysis, explaining its uses and relation to equity valuation. It discusses company grouping methods, business cycle sensitivity, and industry classification systems. Additionally, it explores strategic industry analysis, pricing power factors, industry life-cycle models, macroeconomic influences, and key elements of thorough company analysis.\",\n  \"uploadDate\": \"2022-05-12T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/labqtlwTF_c\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/youtu.be\/labqtlwTF_c\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/labqtlwTF_c\",\n  \"duration\": \"PT41M53S\"\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"@id\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/equity\/factors-influence-industry-growth-profitability-risk\/#qapage-question-1\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"@id\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/equity\/factors-influence-industry-growth-profitability-risk\/#question-1\",\n    \"name\": \"What is an example of a demographic influence?\",\n    \"text\": \"What is an example of a demographic influence?\\nA. The housing industry benefitting from the Fed\u2019s decision to lower interest rates.\\nB. The decline of the traditional brick-and-mortar video rental industry facing competition from online-only rivals.\\nC. High growth in the healthcare sector partially due to an increasing number of seniors as a proportion of the United States\u2019 population.\",\n    \"answerCount\": 1,\n    \"author\": {\n      \"@type\": \"Organization\",\n      \"name\": \"AnalystPrep\"\n    },\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"@id\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/equity\/factors-influence-industry-growth-profitability-risk\/#answer-1\",\n      \"text\": \"C. High growth in the healthcare sector partially due to an increasing number of seniors as a proportion of the United States\u2019 population. The shifting proportion of the US population toward the older end of the age spectrum represents a demographic influence.\",\n      \"author\": {\n        \"@type\": \"Organization\",\n        \"name\": \"AnalystPrep\"\n      }\n    }\n  }\n}\n<\/script>\n\n\n\n\n\n<iframe loading=\"lazy\" width=\"611\" height=\"344\"\n  src=\"https:\/\/www.youtube.com\/embed\/labqtlwTF_c\"\n  title=\"YouTube video player\"\n  frameborder=\"0\"\n  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\"\n  referrerpolicy=\"strict-origin-when-cross-origin\"\n  allowfullscreen>\n<\/iframe>\n\n\n\n<p>External factors affecting an industry\u2019s growth include macroeconomic, technological, demographic, governmental, and social influences.<\/p>\n<h2><strong>Macroeconomic Influences<\/strong><\/h2>\n<p>Cyclical or structural trends may have significant effects on the demand for an industry\u2019s products or services. An industry\u2019s sales and profitability may be impacted by gross domestic product, interest rates, credit availability, and\/or inflation.<\/p>\n<h2><strong>Technological Influences<\/strong><\/h2>\n<p>New technologies create new or improved products that can radically change an industry and change how other industries use the products to conduct their operations.<\/p>\n<h2><strong>Demographic Influences<\/strong><\/h2>\n<p>Changes in population size, the distribution of age and gender, and other demographic characteristics may have significant effects on economic growth and the amount and types of goods and services consumed.<\/p>\n<h2><strong>Governmental Influences<\/strong><\/h2>\n<p>Governments may have a significant influence on industries through their ability to control tax rates and their status as major purchasers of goods and services from a range of industries. Governments may also exert their influence indirectly by empowering other regulatory or self-regulatory organizations to govern the affairs of an industry.<\/p>\n<h2><strong>Social Influences<\/strong><\/h2>\n<p>Societal changes involving how people work, spend their money, enjoy their leisure time, and conduct other aspects of their lives can significantly affect the sales of various industries.<\/p>\n<blockquote>\n<h2><strong>Question<\/strong><\/h2>\n<p>What is an example of a demographic influence?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">The housing industry benefitting from the Fed\u2019s decision to lower interest rates.<\/li>\n<li data-tadv-p=\"keep\">The decline of the traditional brick-and-mortar video rental industry facing competition from online-only rivals.<\/li>\n<li data-tadv-p=\"keep\">High growth in the healthcare sector partially due to an increasing number of seniors as a proportion of the United States\u2019 population.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>C<\/strong>.<\/p>\n<p>The shifting proportion of the US population towards the older end of the age spectrum represents a demographic influence.<\/p>\n<p><strong>A is incorrect<\/strong>. The Fed\u2019s decision to lower interest rates could be considered both a macroeconomic influence and governmental influence.<\/p>\n<p><strong>B is incorrect<\/strong>. The decline of traditional video stores was largely caused by technological influences.<\/p>\n<\/blockquote>\n\n","protected":false},"excerpt":{"rendered":"<p>External factors affecting an industry\u2019s growth include macroeconomic, technological, demographic, governmental, and social influences. Macroeconomic Influences Cyclical or structural trends may have significant effects on the demand for an industry\u2019s products or services. An industry\u2019s sales and profitability may be&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-1958","post","type-post","status-publish","format-standard","hentry","category-equity","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Factors Affecting Industry Growth &amp; Profitability | CFA<\/title>\n<meta name=\"description\" content=\"Industry growth, profitability, and risk are influenced by macroeconomic, technological, demographic, governmental, and social factors.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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