A company's competitor develops a cheaper alternative that meets the same need in a completely different way. Which force of Porter's model does this represent?
Answer and explanation
Correct answer: C. The threat of substitutes
- Step 1: A substitute meets the same need in a different way.
- Step 2: Cheaper substitutes limit the prices that firms in the industry can charge.
Answer
The threat of substitutes.
Why not the others: The threat of new entrants: The question describes an alternative product, not a new company entering. The bargaining power of suppliers: There is no mention of suppliers. Competitive rivalry: Rivalry concerns direct competitors with the same sort of product.
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