Generally, a dynamic environment is characterized by newly formed or re-formed industries that have been created by technological innovations, the emergence of new consumer needs/ segments, or other socio-economic changes that elevate a new product or a service to the level of potentially viable business opportunity. A dynamic environment is also created when old/traditional industries experience fundamental shifts in competitive rules coupled with growth in scale by orders of magnitude, caused by some of the factors mentioned earlier.

The essential characteristic of a dynamic environment is the absence of any “rules of the game” which may pose a risk or provide an opportunity. In either case, it must be managed from the strategic management point of view. The following section outlines the common characteristics of a dynamic industry environment.