Guide Case Analysis on Substitution Threats

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Nokia underestimated how dominant the iPhone and Android smartphones would become over the coming years. To avoid the same fate, never project future success based on current market conditions, as market players, product innovations, and customer expectations can change in an instant. Others want to get in on the same business when they notice that business owners are onto something. When your competitors copy your moves, it means you are leading in your industry.

In some cases, companies that used to be competitors have learned that collaboration can be mutually beneficial. Sometimes this manifests as acquisition—one company being absorbed into another—but it might also look like a strategic partnership where two parties retain independence. By looking at your competitors as potential partners and by creating strategic alliances, you may open yourself up to more business and more success in your industry. The party and event planning industries are saturated with players; in the US alone as of , there are , party and event planning businesses.

In , while on holiday with his wife, the couple played miniature golf on a course next to their hotel. When they got home, Fox came up with the idea of creating a portable course that could be used at parties and other events.

Apple Inc. Five Forces Analysis (Porter’s Model)

He left his sales career, built the course, bought a van, developed a website, and designed a logo. On March , Crazy Fox Golf was born. When he contacted venues such as pubs and leisure centers in his local area of Derbyshire and Nottinghamshire in the United Kingdom, he received mixed reactions. But his persistence paid off, and soon he started to get bookings.

Threat of new entrants (Medium +)

In the beginning, he did a bi-weekly event in a local leisure center. When people started talking about Crazy Fox Golf, more business came in. This led to an editorial coverage in the local papers which, in turn, brought in more business—this time, through corporate events. Businesses come and go. But consider competition as a challenge for you to improve your products or services.

Analyze and strategize. A good strategy will help you compete with other industry players and ultimately get you ahead in the game. It was revised in Return to blog home. The 5 forces that drive industry competition According to Professor Michael E. Industry rivalry The first of the five forces focuses on the intensity of the current competition in the marketplace.

Threat of new entrants New industry players are always a threat to existing businesses. Bargaining power of customers Customers can affect the pricing.

Strategy: Porter’s Five Forces explained (plus example Uber)

Bargaining power of suppliers If customers can drive prices down, suppliers can drive prices up. Threat of substitutes The demand for substitutes can reduce the demand for industry products and services. How should business owners deal with industry competition? Identify a need in the industry and satisfy it with a product or service It is great to be the inventor of a specific product or service, but sometimes all you have to do is reinvent what is already out in the market. Improve on existing products or services Virgin Airlines was established by Richard Branson when his flight to the Virgin Islands in was canceled.

Focus on the needs of your customers Apple has developed several innovative products and created a network of services that seamlessly work together. Do not focus on your competitors Do not fall into the habit of constantly checking on your competitors. Some competitors may turn out to be good partners In some cases, companies that used to be competitors have learned that collaboration can be mutually beneficial. Case study: a small business that succeeded in a saturated market The party and event planning industries are saturated with players; in the US alone as of , there are , party and event planning businesses.

Harriet Genever Harriet Genever is a freelance writer and copyeditor, specializing in blog posts, research articles and customer case studies. As the founder of her Australian-based business, Write Beyond, she works with B2B companies and small business, developing compelling content to attract customers and keep them engaged. With a background in Human Resource Management, Harriet enjoys the personal interaction with clients and their customers when working on writing projects.

What to take from the Five Forces

Start creating a list of potential substitutes that you evaluate as a threat in an external analysis. Download the free External Analysis whitepaper by clicking here or the image below. The step-by-step plan to set your prices to maximize profits. Not a Lab Member? Pepsi for coke or water these days if you are thinking beverages,. Competitors are substitutes most of the time. But, since Coke and Pepsi are manufactured by the same company, they are not competitors because both their profits will be earned by the same organization. They give somewhat the same satisfaction.

Thank you for some other informative site. The place else may just I am getting that kind of information written in such a perfect means?

FedEx Corporation Porter Five (5) Forces & Industry Analysis [Strategy]

Actually yes,Coke can be substituted by Pepsi eventhough they are manufactured by the same company. But can we really say one is a threat to the other yet somebody mentiined that the profits are still going to be earned by the same company? Substitutes are alternative product that consumers can purchase instead of products in the industry. In other words, threat of substitutes affect all the players in that industry.

However, tea can be classified a substitute cos it affects the entire industry where Coca Cola and Pepsi belongs to.

Note that the effect of such threat will not be limited to one Airline but all. Now that is substitute that needs to be analyzed with other forces while carving out your strategy.

Threat of Substitutes

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