CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: External Environment
An Indian edtech company notes that students can now use free video lectures and AI-based self-study apps instead of paid coaching classes offered by the company. In Porter's Five Forces analysis, this development primarily raises which force?
The development raises the threat of substitutes. Free video lectures and AI self-study apps meet the same learner need as paid coaching through a different product, so they cap the prices the company can charge and may draw students away.
- AThreat of substitutesCorrect
- BBargaining power of suppliers
- CThreat of new entrants through economies of scale
- DRivalry caused by high exit barriers
Explanation
Free video lectures and AI apps perform the same function (learning) by a different means, so they are substitutes for paid coaching. Their availability limits the price the company can charge and raises the threat of substitutes.
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