According to the Five Forces framework, how can producers of potential substitute goods impact a company's profits?
A)The producers of potential substitute goods may exit the market, signaling that the market demand is weak and profits are low.
B)The producers of potential substitute goods may become actual competitors, causing the market demand to be spread across a larger number of companies and thereby reducing the profits of the original companies.
C)The producers of potential substitute goods indicate that the market supply is shrinking, leading to higher company profits.
D)The producers of potential substitute goods indicate that the market demand is weak, leading to lower company profits.

Question

Quizplus · Accepted Answer

Producers of potential substitute goods can impact a company's profits by becoming actual competitors, which would result in the market demand being spread across a larger number of companies and thereby reducing the profits of the original companies. This is because consumers have the option to choose between the original product and the substitute product, which creates price competition and reduces the profit potential for the original company.

According to the Five Forces Framework, How Can Producers of Potential