The " threat of substitutes" refers to the threat that existing products or services can be replaced by other products that fulfill the same needs in terms of value proposition .
The substitutes referred to here refer to products that are introduced from outside the industry, and we analyze the risk of market share being taken away by these products .
For example, e-books as a substitute for books, music armenia telegram data streaming services as a substitute for music players, home fitness equipment and online fitness services that can be used at home as a substitute for gyms and fitness centers.
In such cases, existing products may lose market share to substitutes, reducing profitability, which could have an impact not only on the company but on the entire industry.
Therefore, it is necessary to consider ways to provide value to the product that alternatives do not have, or to differentiate it by improving its functionality.
Threat of new entrants
The "threat of new entrants" refers to the threat of new competitors entering the market , and new entrants are always a threat to your company's position.
By analyzing the height of the hurdles for new entrants , if new companies enter the market, the competition will intensify, which could threaten your company's position and have a negative impact on the company.
A market with low barriers to entry increases the risk of new entrants, which will result in more companies entering the industry in the future, increasing competition within the industry and reducing profits.
On the other hand, if the barrier to entry is high, there is a higher chance of securing a certain level of profitability , making it an attractive industry.
Effective measures to counter this threat include strengthening your company's market influence and reviewing your pricing.
Threat of buyers (bargaining power)
In "Buyer's Bargaining Power," the buyer is the customer, and you analyze your company's relationship with the buyer to determine whether the buyer is in a favorable position to negotiate with the seller.
The competitive factor analyzed here is the strength of buyers' demands on sellers for price reductions and improved quality, etc.; buyers with strong negotiating power may demand added value such as price reductions , improved quality, and generous support, and this depends on the balance of supply and demand in the market .
As a result, the greater the buyer threat, the lower the profitability.
When there are few buyers, buyers have a lot of influence over sellers and can therefore strongly insist on demands such as price negotiations and quality improvements.
On the other hand, if a company deals in products that are patented, the buyer's bargaining power will be lower.