Question

Tom and his family have developed a successful business selling a liquid spray fertilizer to farmers. The fertilizer consists of rich, organic, composted material. Recently NuBreed Seed, a national seed company, has been marketing a powdered chemical fertilizer to its customers; NuBreed's fertilizer is less expensive than Tom's product.
NuBreed's efforts are an example of the ___ in Porter's model for industry analysis.

A) threats of substitute products and services
B) threats of new ideas
C) power of the suppliers
D) competitive rivalry among competitors
E) buyers' negotiating influence

Answer 1

Answer:

A) threats of substitute products and services

Explanation:

Porter's five forces model is used to evaluate how a company competes in a certain market. This makes it possible to analyze factors such as threat of new entrants, threat of new substitutes, competitive rivalry, bargaining power of buyers and suppliers because they affect a company's profitability. In this case, NuBreed's fertilizer is a substitute product for Tom and his family's liquid spray fertilizer. This makes it an example of a threat of substitute product and service in the Porter's five forces model.