Research Guides: Porter's Five Forces Analysis: Threat of Substitution

Threat of Substitution. What is it?

Threat of Substitution

Companies are concerned about the threat of substitute products (or services) displacing their own. The threat of substitutes is high when rivals or even companies outside the industry offer more attractive and/or lower cost products. Buyers then have the opportunity to make a price/performance trade-off. The cost of switching is also a factor; if it is high, the treat of substitution is low.

Questions to Ask

Is it easy for consumers to switch to another product/service?

What are the major substitute products?

What are the trends in market share of the product and its substitutes?

What are the growth rates?

What are the price/value characteristics?

Are consumer preferences or consumer demographics changing?

What are the Company's Products and Brands?

Companies describe their business and list their business segments, products and brands in Item 1 of their 10-K report to the SEC. Find the 10-K report on the company's website on the "Investor Relations" page or search the SEC's EDGAR database.

Find Market Share of Products or Brands

Passport (Euromonitor)
All Passport Industry Reports include a detailed "Market Data" section that includes market share and market segmentation data. If the industry is broken out into categories, the "Category Briefings" will also include market data.
Use the Passport Company Profiles to read an analysis of the company's "Competitive Positioning."
Mintel Academic
Mintel industry reports come in four parts that cover the market, consumers, brands/company, and data. Read the Consumer section for analysis of buyer attitudes and behavior and the Data section for numbers on market share and sales for products and brands.

Find News about Innovation and New Products

Articles from trade journals are some of the best sources of information on new products and technology innovation.

Business Source Complete
Search using one of these subjects: Technological innovation, new product development, product launches, innovations in business, research & development or disruptive technologies.
Factiva
Search with one of these subjects: intellectual property, new products/services, licensing agreements or research/development.

Find News and Research on Brand Equity

WARC
This marketing/advertising database offers their own market research as well as news, case studies and research articles. Begin any search at "Topics" (at the top of the home page). The topic "Brands and Branding" offers coverage of brand analysis, brand identity, brand values and more. To see the latest brand trends look for "Challenger Brands" which are new or growing brands that are challenging the market leaders. (Search Google with the term "challenger brands" and your product/industry to find more trends.)

Find Reports on Consumer Preferences/Consumer Demographics

Mintel Academic
Mintel market research reports analyze market size and segmentation, consumer attitudes and marketing strategies. Reports cover consumer product industries in the U.S. and the UK., especially emerging or niche industries. Their Lifestyle reports feature the latest trends in consumer demographics.
Passport (Euromonitor)
Passport offers industry research, company analysis, consumer profiles and news for markets in over 200 countries. Start at the "Consumers" tab (top of the home page) to find reports on "Consumer Trends and Lifestyles" and "Incomes and Expenditures."