Potential entrants and substitute products

 

Potential entrants are new or existing businesses that are not yet rivals but may enter the market in which your firm operates. Companies may consider entering the industry or area in which you work for a variety of reasons. Low entrance barriers, for example, are one of these. Suppliers are easily accessible. Distribution is easy. Customers aren't extremely loyal to brands. Customers can swap brands at a low cost. Economies of scale achieved rapidly and simply. Government regulations have made it simpler to get into the industry. 

There will always be potential entrants eager to offer you with competition if a sector provides rapid or huge potential returns. Some industries are less difficult to get into than others. For example, a corporation joining the service industry faces less restrictions than one entering the manufacturing industry.  

 

A substitute product uses an alternative method to achieve the same or identical purpose as an industry product. Even though they don't appear to be similar on the surface, they fundamentally meet the same underlying need. As a result, they're simple to ignore. Literally having these items raises the likelihood of customers switching to alternatives. You need to go beyond identical products that are labeled differently by rivals to find these options. Instead, any product that meets a similar customer need should be considered. Red bulls, for example, are not often thought of as rivals to coffee companies like Starbucks. However, because both coffee and energy drinks satisfy the same demand of remaining awake or gaining energy, customers may be prepared to move from one to the other if they believe the price of either coffee or energy drink has grown excessively. The overall threat of alternative products is thus determined by the quantity of substitutes, consumers' willingness to substitute, and the relative price performance of substitute products.