Miss

Porter’s five

forces

· Buyers are free to switch to other goods (substitutes) and are

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forces sensitive to price, they accept there is usually a trade off between

price and quality, there is no “free lunch.”

· Substitute goods exist competing for buyers money. Some

substitutes are defined as perfect substitutes, e.g. a Panasonic

VHS recorder maybe a perfect substitute for a Sony VHS

machine, while others are close substitutes, e.g. a Philips DVD

player. More distant substitutes may be more different still, e.g.

a trip to the cinema.

· Ultimately, given time, all goods may substitute for all other

goods, e.g. money saved from not buying a new VHS may be

used to finance a new house.

· Suppliers must compete for firms business in terms of price and

quality. A variety of suppliers ensures that no one supplier can

exert undue influence over the firm.

· New entrants are free to enter the market provided they can