Porter’s Five Forces
(Threat of Substitutes)
• Threat of substitutes results in
decreased overall industry profitability
(i.e., Wine is a substitute to Beer)
• The higher the cross-elasticity of
demand of a substitute product, the
higher is the threat of that substitute
product.
• Threat of substitutes is higher in an
industry with few competitors.
• Threat of substitutes is lower in an
industry with excess capacity.
• Threat of substitutes from a disruptive
technology can be very high (i.e., the
Internet has emerged as a disruptive
medium / product to traditional TV /
print media).
©2006 - 2007 Franteractive Inc. All rights reserved.
