What is a key reason for the competitive pressures experienced from substitute products?

Competitive pressures from substitute products arise significantly from the number of available substitutes in the market. When there are many alternative products that can fulfill the same need or requirement, buyers have more choices and can easily switch to these substitutes if they find them more appealing or cost-effective. This abundance of options leads to heightened competition among firms, as they must not only focus on their pricing strategies but also on differentiating the quality and features of their products to retain customer loyalty.

When there are fewer substitutes available, companies face less pressure because consumers have limited alternatives, allowing them to maintain higher prices or market share without as much concern for competition. Conversely, the presence of many substitutes can lead to price wars, increased marketing efforts, and innovation pressures, as businesses strive to attract customers who are tempted by comparable offerings. Thus, having numerous substitutes directly influences how companies strategize to maintain competitiveness in their respective markets.