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Definition

Threat of substitutes

In general, industries are more attractive when the threat of substitutes is low. This means that products or services from other industries can’t easily serve as substitutes for the products or services being made and sold in the local firm‘s industry. For example, there are few if any substitutes for prescription medicines, which is one of the reasons the pharmaceutical industry is so profitable, when people are sick, they typically don’t quibble with the pharmacist about the price of a medicine.

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