The threat of substitute products or services in Porter's Five Forces Analysis impacts industry profitability by meeting the same basic need in a different way. When a new product or service is introduced that can fulfill the same need as an existing product or service but in a different manner, it can lead to a decrease in the profitability of the industry. This is because customers may switch to the substitute product or service if it offers a better value proposition, such as lower price or improved functionality. This can lead to a decrease in demand for the existing product or service, thereby reducing the profitability of the industry.

stars icon
6 questions and answers
info icon

Intense rivalry among existing competitors in an industry, according to Porter's Five Forces Analysis, can negatively impact value creation. This is because when competition is high, companies may engage in price wars, which can drive down prices and reduce profitability. Additionally, intense competition can increase the costs of competing as companies may need to invest more in marketing, research and development, and other areas to maintain or gain market share. This can further erode profits. Ultimately, intense rivalry can lead to a situation where companies compete away the value they create.

Companies can manage the bargaining power of suppliers in several ways. They can develop multiple sources of supply to reduce dependency on a single supplier. They can also make strategic partnerships with suppliers or even acquire them to have more control. Additionally, companies can switch to substitutes or even produce the necessary inputs in-house. Lastly, companies can increase their bargaining power by increasing their volume of purchase, thereby becoming a significant customer for the supplier.

The bargaining power of buyers is one of the five forces in Porter's Five Forces Analysis. It refers to the ability of customers to affect the pricing and quality of goods or services. When buyer power is strong, the buyer has the ability to demand lower prices or higher product quality. They can change suppliers without significant switching costs. Conversely, when buyer power is weak, companies can raise prices and dictate terms. This force can greatly influence the competitive environment and profitability of an industry.

View all 6 questions
stars icon Ask another question
This question was asked on the following resource:

Porter's Five Forces Analysis

Competition management is at the core of strategy formulation and an understanding of the underlying...

Download template
resource preview

Download and customize more than 500 business templates

Start here ⬇️

Voila! You can now download this Presentation