ACCA Strategic Professional · Strategic Business Leader · Competitive forces
Lumina Rail operates intercity train services between two large cities. Over the past three years, low-cost coach operators and a new video-conferencing platform have persuaded many business travellers to stop travelling by train. Applying Porter's five forces, which force best describes this threat?
The threat is substitutes. Coach travel and video-conferencing satisfy the same customer need as intercity rail but in a different form, so they come from outside the rail industry. They are not new rail entrants and do not reflect buyer or supplier power.
- AThreat of substitutesCorrect
- BThreat of new entrants
- CBargaining power of buyers
- DBargaining power of suppliers
Explanation
Coaches and video-conferencing meet the same underlying need (getting business done between cities) through a different product or service, so they are substitutes. They are not new entrants into rail services. The coach operators compete in a different industry definition, so classing them as rivalry or entry would be wrong.
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