BU111 Lecture Notes - Lecture 10: Substitute Good, Price Ceiling, Convenience Store
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More competitors = you have to work harder to distinguish your product. The greater the substitutes the less of a profit one market will make. Customers will realize yours is not as good as what you are offering but will sacrifice this for price difference (ex. Cars and bikes (cid:271)ike is(cid:374)"t as good as o(cid:449)(cid:374)i(cid:374)g a (cid:272)ar (cid:271)ut pri(cid:272)e differe(cid:374)(cid:272)e is (cid:373)u(cid:272)h (cid:373)ore affordable) Farther you move away from substitutes, the less profits you will make. Substitute products does not always have to be a direct substitution for the product. (ex. Charge you prices for key inputs of your business profits decrease when price of products/materials increase. Being able to choose if the costs are feasible and realistic for them personally so therefor choose the cost no buyers = cost has to lower. We are in middle of this supply chain. Also on outside evaluating from the outside as a potential entrant asking questions feasible to enter this market.
