Threat of substitutes: substitutes are the products which gives same result when use them. If there is a substitute for our products which gives best result than our product then it is great loss to our business. We can’t survive in a market if we can’t find any solution to this issue. Let me give one example for substitutes, initial tape recorder is used to listen to the music. It was a great business one point of time as every one listening to the music. After few days’ compact discs are introduced, it is a substitute of tape recorder business.
The tape recorder market was getting reduced at one point of time this business went off from the market. The substitute product is danger to any kind of business as it gives much damage to the business than others. If a customer can able to switch from our product to substitute with out spending more money then it is the end of our business.
Differentiation is the best way to sustain in market. Add differentiation or uniqueness to the product so that no customer will prefer the substitutes. The cost of our product should be acceptable compare to the substitutes. Innovation is another way to sustain; innovation in our product design attracts more and more customer and keeps them with our business itself.