What determines the power of substitutes in the Porter’s five forces mode, what effect do
substitutes have on profitability and what can a firm do to address this force (4 marks)?
The factors that determine the ppower of substitutes are
- Number of quality substitutes (higher number = higher power) (0.5)
- And the ease of switching to them (lower switching costs = higher power) (0.5)
IM pct on profibtability
- As the price of substitues goes down compared to your pdocuct and it ecomes easier to
switch/switching costs decline, the greater the pressure you face to keep your price
down/puts ceiling on your price (1)
To address the force of substitutes
- Convince customers that your produt is unique and thus can’t be substituted (1)
- Lock customer in so that it is harder/more costly for the to switch (1)
Explain how the elements that make the entrepreneurial process successful are smilar
to/related to the Diamond E (3 ma
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