Pressure from Substitute Products
Understanding the threat of substitutes
This framework outlines the factors that affect the pressure from substitute products in an industry, including the attractiveness of the substitute, the ease of substitution, and the potential for new entrants. Understanding these factors can help businesses develop strategies to mitigate the threat of substitutes.
- The attractiveness of a substitute affects the pressure from substitute products
- The ease of substitution affects the pressure from substitute products
- The potential for new entrants affects the pressure from substitute products
- Identify Potential SubstitutesDetermine the potential substitutes for the industry's products or services.Pro tipConsider the functions and benefits of the industry's products or servicesWarningFailing to identify potential substitutes can lead to underestimating the threat of substitutes
- Assess the Attractiveness of SubstitutesEvaluate the attractiveness of the substitutes, including their price, quality, and convenience.Pro tipConsider the factors that affect the attractiveness of substitutesWarningFailing to assess the attractiveness of substitutes can lead to underestimating the threat of substitutes
The sugar industry faced a significant threat from high fructose corn syrup, a sugar substitute.
Michael E. Porter developed this framework as part of his work on competitive strategy. He recognized that substitute products can be a significant threat to a company's profitability and developed this framework to help businesses understand and analyze the factors that affect the pressure from substitutes.