![]() Demand for substitutes can also reduce the demand for industry products and services. ![]() ![]() As the price-performance alternative offered by substitutes becomes more attractive, it becomes even more difficult for those firms to make a profit. Substitutes limit an industry’s potential returns by placing a ceiling on the prices that firms within that industry can charge to make a profit. Substitutes, potential returns, profits and competition Threat of substitutes is one of the five forces that determine the intensity of competition in an industry. Threat of substitutes (from Porter’s five forces analysis) occurs when companies within one industry are forced to compete with industries producing substitute products or services. Researching a market? Our free online course Introduction to Market Sizing offers a practical 30-minute primer on market research and calculating market size.
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