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Threats of Substitute Products or Services

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Threats of Substitute Products or Services

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When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry. To tackle this the company should being service oriented rather than just product oriented and understand the core need of the customer rather than what the customer is buying.

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The bargaining power - LOW - Developed Markets - Common nature of it - easily replaceable - cheaper elsewhere

Price changes of raw inputs - changes - demand determinants - global supply - uncontrollable

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With increased choice of telecom products and services, the bargaining power of buyer is rising. Telephone and data services do not vary much, regardless of which companies are selling them. For the most part, basic services are treated as a commodity. This translates into customers seeking low prices from companies that offer reliable service. At the same time, buyer power can vary somewhat between market segments. While switching costs are relatively low for residential telecom customers, they can get higher for larger business customers, especially those that rely more on customized products and services.

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The capital-intensive telecom industry is the major barrier to entry which access to finance such as cover for high fixed costs. For new entrants,  it might require a lot of cash to start up the business. When financing opportunities are less readily available, the pace of entry will be slower. It shows that there is a low threat of new entrants.

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Supermarkets & grocery stores dominate the market share & profits

Small bakeries - medium - sell - products - Established ones - power - balanced profits

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If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. To tackle this the company can build a sustainable differentiation of products and collaborating with competitors to increase the market size rather than just competing for small market.

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Many substitutes exist for bakery products. The business will face threat of substitutes from local bakeries that are found more convenient by being simply located in local grocery stores.  Local grocery stores can provide cakes for special occasions and a variety of certain sweets that are also made daily. Customers may find this being a substitute when they can simply go in their local grocery store and order a cake for their occasion or simply buy the brownie mix to make their selves.

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Very high - lots of bakeries to compete w - competing against price, value, quality - Product differentiation vs cost leadership
>>Specialties bakeries such as Wedding Cakes
>>Value bakes such as the one near near ICS....Sapri Bakery

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Barriers to entry in this industry are low because the amount of resources that are required to start a business are high and the development of a distribution network are complicated. Distribution channels typically involve retail outlets, such as supermarkets and grocery stores.

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It might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Of course without high-tech broadband switching equipment, fiber-optic cables, mobile handsets and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But there are actually a number of large equipment makers around. There are enough vendors, arguably, to dilute bargaining power. The limited pool of talented managers and engineers, especially those well versed in the latest technologies, places companies in a weak position in terms of hiring and salaries.