Miss

Porter's five

forces

* Buyers are free to switch to other goods (substitutes) and are

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forces sensitive to price, they accept there is usually a trade off between

price and quality, there is no "free lunch."

* Substitute goods exist competing for buyers money. Some

substitutes are defined as perfect substitutes, e.g. a Panasonic

VHS recorder maybe a perfect substitute for a Sony VHS

machine, while others are close substitutes, e.g. a Philips DVD

player. More distant substitutes may be more different still, e.g.

a trip to the cinema.

* Ultimately, given time, all goods may substitute for all other

goods, e.g. money saved from not buying a new VHS may be

used to finance a new house.

* Suppliers must compete for firms business in terms of price and

quality. A variety of suppliers ensures that no one supplier can

exert undue influence over the firm.

* New entrants are free to enter the market provided they can

secure the resources (capital, labour, knowledge) required to

enter the market. Above normal profits will attract new potential

entrants to the market, however, not