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Essay text:
The figure shows these competitive forces.
The threat of substitute products
The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).
? buyer propensity to substitute
? relative price performance of substitutes
? buyer switching costs
? perceived level of product differentiation
The threat of the entry of new competitors
Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition)...
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Common topics in this essay:
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