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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment

A packaged water brand finds that consumers are increasingly switching to home water purifiers and reusable bottles that serve the same basic need. According to Porter's framework, this is mainly an example of:

This is the threat of substitutes. Home purifiers and reusable bottles are products from other industries that meet the same customer need for safe drinking water, so they can draw customers away from packaged water and limit the prices the brand can charge.

  1. AThreat of substitutesCorrect
  2. BThreat of new entrants
  3. CBargaining power of suppliers
  4. DRivalry among existing competitors

Explanation

Home purifiers and reusable bottles come from outside the packaged water industry but satisfy the same need of safe drinking water. Such alternatives are substitutes, not new entrants, who would sell the same product category.

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