Concepts of industry analysis and substitutable goods

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When examining the forces, it is important to consider the basic concepts of industry analysis and substitutable goods. For example, if asked whether Pepsi Cola is a substitute for Coca-Cola, those with a basic understanding of industry analysis may say, "yes" because the products are in the same category. Yes, they are both colas with identical product characteristics, but they are not necessarily substituting. To be a substitute product, according to Porter, they can both satisfy the same need, but they have to appear to be different. Therefore substitute products would not have similar product characteristics and Pepsi Cola and Coca Cola would not be true substitutes. How about coffee and tea? Would either be a substitute to a cola, according to Porter?

Reference no: EM131414815

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