Threat of Substitute Products/Services Quiz
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Questions and Answers

Which of the following is true about the threat of substitute products/services?

  • Substitutes can increase the profit potential of an industry
  • The threat of a substitute is low if it offers an attractive price-performance trade-off to the industry’s product
  • Strategists need not be alert to changes in other industries that may make them attractive substitutes
  • Substitutes can limit the profit potential of an industry by placing a ceiling on prices (correct)

    • What can an industry do to distance itself from substitutes?

  • Increase the buyer's cost of switching to the substitute
  • Lower prices to match the substitute's price-performance trade-off
  • Improve product performance and marketing (correct)
  • Nothing, as substitutes are always a threat to an industry's profitability

    • When is the threat of a substitute high?

  • If it offers a higher price-performance trade-off than the industry's product
  • If the industry's product has a unique feature that cannot be replicated by the substitute
  • If it offers an attractive price-performance trade-off to the industry’s product or if the buyer’s cost of switching to the substitute is low (correct)
  • If the buyer's cost of switching to the substitute is high

    • What can increase the intensity of rivalry among existing competitors in an industry?

    <p>A decrease in industry growth</p> Signup and view all the answers

    Under what circumstances can rivalry among competitors actually increase the average profitability of an industry?

    <p>When competitors aim to serve the needs of different customer segments</p> Signup and view all the answers

    What is the effect of high rivalry on the profitability of an industry?

    <p>It decreases the profitability of an industry</p> Signup and view all the answers

    What are some factors that can increase the intensity of rivalry among competitors?

    <p>Competitors are few and unequal in size and power</p> Signup and view all the answers

    What can positive sum competition do for an industry?

    <p>Expand the industry by better meeting the needs of more customer groups</p> Signup and view all the answers

    What is the impact of high rivalry on the profitability of an industry?

    <p>It limits the profitability of an industry</p> Signup and view all the answers

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