Which Porter's force describes the threat of substitute products?

Which Porter's force describes the threat of substitute products?

• A. Potential new entrants
• B. Threat of substitute products
• C. Bargaining power of suppliers
• D. Bargaining power of customers

Answer: (B)

In Porter’s framework, the threat of substitutes describes the risk that customers can switch to alternative products or services that satisfy the same need. When substitutes are readily available, affordable, and offer similar or better value, the threat is high and can squeeze industry profitability. This force depends on price-performance trade-offs, switching costs, and how attractive alternatives from other industries are to buyers. It’s distinct from barriers to entry (which concern new competitors), supplier power, and buyer power, because it specifically looks at outside options that fulfill the same need. For example, streaming services can substitute traditional cable, and battery-powered vehicles can substitute internal-combustion cars, illustrating how substitutes can erode demand within an industry.

In Porter’s framework, the threat of substitutes describes the risk that customers can switch to alternative products or services that satisfy the same need. When substitutes are readily available, affordable, and offer similar or better value, the threat is high and can squeeze industry profitability. This force depends on price-performance trade-offs, switching costs, and how attractive alternatives from other industries are to buyers. It’s distinct from barriers to entry (which concern new competitors), supplier power, and buyer power, because it specifically looks at outside options that fulfill the same need. For example, streaming services can substitute traditional cable, and battery-powered vehicles can substitute internal-combustion cars, illustrating how substitutes can erode demand within an industry.