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What is the relationship between a firm’s industry environment and the firm’s earning potential?

1. The more a firm can favorably influence its industry environment, the more likely it is to achieve above-average returns.

2. A firm cannot influence the industry environment, and must focus on other factors in order to achieve above-average returns.

3. The less a firm is affected by its industry environment, the better situated it is to achieve above-average returns.

4. The more a firm can neutralize competitors’ advantages, the greater its chances are for above-average returns.

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