Threat of substitutes product

How To Overcome The Threat Of Substitutes

Are there any barriers that may stop a customer from switching. For example, Nike may be able to buy exponentially more cotton for T-shirts than UA and negotiate a substantially lower price.

Porter’s Five Forces- Threat of Substitute Products or Services

The belief or experience of the customers makes them select substitute products. For this reason, soft drink companies have huge marketing and advertising budgets and a lot of effort goes into creating and maintaining brand visibility and loyalty.

It faces the challenge of competing against long-standing industry giants such as Nike and Adidas. One to prevent customers from leaving for a substitute and the other to entice people over from a substitute. An attractive price of a substitute acts inhibits an industry from reaching its profit potential.

Differentiation may be introduced in the form of price, quality, performance, features, durability, reparability, and style, etc.

Threat Of Substitutes | Porter’s Five Forces Model

To identify potential threats, the company needs to be creative in its thought process and look beyond traditional competitors. The largest of these competitors are Nike and Adidas. An example of this is the option to choose different modes of transportation when going from destination A to destination B.

Identify Problems Identify the problems that can be solved by your product or service. It is an important factor because it affects company and industry profitability.

Work Towards Building Customer Loyalty Through sustained good relationships, good service and continued value for money, customer loyalty can be created and built up over time. In more generic products, there are often more than one ways to address a particular need.

I decided to go to Target because I know my mind will wander from groceries to something else like electronics or clothing.

Identify Substitute Appeal At this point, try to understand why an alternate solution may be appealing to a consumer. While any negative public relations related to the industry will drive all consumers away from the product regardless of their brand choices and preferences.

Elastic demand means increased consumer price sensitivity which equates to less certainty of profits. These offers may be in the form of discounts, one plus one offer, gifts, special packages and trail purchases etc.

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If this value is created for a customer than they may not need to look at other products Brand Loyalty: Competition in the Industry While there are countless numbers of athletic apparel companies that compete with UA in certain market niches, only a few companies have the sheer size and established distribution channels to compete across all the product lines UA offers.

Second, if the substitute product is cheaper than the industry’s product – thereby placing a ceiling on the price of the industry’s product – then a threat of substitutes high risk is the case. Third, if the substitute product is of equal or superior quality compared to the industry’s product, the threat of substitutes is high.

Threat of Substitute Products Clothing is a staple item that is always in demand. As worldwide interest in sports continues to rise, the demand for athletic clothing and accessories is expected to. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product.

A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more. The threat of substitute products or services directly impacts competition and an industry organization’s ability to make a profit, because the availability of substitute products or services is the driving force.

The higher the availability the lesser the profit. Threat of Substitute Products or Services: A substitute is a product that performs the same or similar function as another product.

Porter’s Five Forces- Threat of Substitute Products or Services

Microeconomics teaches that the more substitutes a product has, the demand for the product becomes more elastic. Third, if the substitute product is of equal or superior quality compared to the industry’s product, the threat of substitutes is high.

And fourth, if the functions, attributes, or performance of the substitute product are equal or superior to the industry’s product.

Threat Of Substitutes | Porter’s Five Forces Model Threat of substitutes product
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