Threat of substitute products is low when ___________.
(i) Profitability of industry producing substitute is high;
(ii) Rate of improvement in price-performance relationship of substitute product is low;
(iii) Buyers switching costs are high;
(iv) Substitute products provide comparable value
A) (i) only
B) (ii) and (iii) only
C) None of the above
D) All of the above

Question

Quizplus · Accepted Answer

The threat of substitute products is low when the rate of improvement in the price-performance relationship of substitute products is low, meaning they are not becoming significantly better or cheaper over time, and when buyers' switching costs are high, making it financially or practically difficult for customers to switch to a substitute. High profitability of the industry producing the substitute (i) and substitute products providing comparable value (iv) would actually increase the threat of substitutes, not decrease it.

Threat of Substitute Products Is Low When ___________