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CS-162 Porters Five Forces - Part 02 Threat of Substitutes v05

CS-162 Porters Five Forces - Part 02 Threat of Substitutes
Case Study (CS-162) - Porter's Five Forces - Part 02 - Threat of SubstitutesSubstitute products use different means and technologies to try to solve thesame economic need - such as meat vs fish. Substitute products tend tocompete through their Horizontal Differentiation. To limit the Threat ofSubstitutes, companies can increase their Horizontal Differentiation by offeringbetter value through new features or wider product accessibility. Background: The food distribution business is fragmented and competitive. Inaddition to having rival food distribution companies, substitute offerings are alsoavailable. Buyers can avoid distribution altogether by buying directly from themanufacturing supplier, or by using retail sources.Sysco changed the market dynamics by emphasizing value-added services tobuyers - such as credit, menu planning, and inventory management. Theseservices shifted the competitive dynamics away from just the cheapest price. Originally Customers couldchoose between SyscoDistribution or the NoDistribution Substitute and buydirect from the Supplier. Sysco offered positive value tosome Customers. But Sysco'sPrices were higher and, as theybuy from the same Suppliers,their Costs were no cheaper. Sysco adds three Value AddedService options. These add tothe Price and most Customersfind these options unattractive. With Sysco's three new ValueAdded Service options, plus theirbase Product and the SupplierSubstitute, Customers now have5 options to choose from. The Willingness To Pay (WTP) ofCustomers for the core Productplus the Value Added Services isaggregated together. Over 60% of Customers select tosave money by buying direct fromthe Supplier. By shifting the competitivedynamics away from just whichProduct has the cheapest Price,Sysco increases share by 5%.Value ofSupplier FoodBuy DirectSysco DistributionValue ofSysco DistributionBuyerAlternativesSuppliervs. SyscoResultsValue AddedServicesZero MinimumValue of ServiceBuy FromSupplier Directvs Sysco DistributionCreateFeature ListDataClean UpDataClean UpAdd NewSysco OptionsSupplier vsSysco andSysco OptionsCreateFeature ListNew AlternativesSysco OptionsSuppliervs. SyscoResults TotalRemoveNo SaleCustomersAppend ValueAdded Services CustomerDistributions Table Creator CustomerDistributions Product Generator Simulate Market CustomerDistributions Math Formula(Multi Column) Table Creator Feature TableTo List Column Filter Column Filter Table Creator Simulate Market Feature TableTo List Product Generator GroupBy Row Filter Column Appender Case Study (CS-162) - Porter's Five Forces - Part 02 - Threat of SubstitutesSubstitute products use different means and technologies to try to solve thesame economic need - such as meat vs fish. Substitute products tend tocompete through their Horizontal Differentiation. To limit the Threat ofSubstitutes, companies can increase their Horizontal Differentiation by offeringbetter value through new features or wider product accessibility. Background: The food distribution business is fragmented and competitive. Inaddition to having rival food distribution companies, substitute offerings are alsoavailable. Buyers can avoid distribution altogether by buying directly from themanufacturing supplier, or by using retail sources.Sysco changed the market dynamics by emphasizing value-added services tobuyers - such as credit, menu planning, and inventory management. Theseservices shifted the competitive dynamics away from just the cheapest price. Originally Customers couldchoose between SyscoDistribution or the NoDistribution Substitute and buydirect from the Supplier. Sysco offered positive value tosome Customers. But Sysco'sPrices were higher and, as theybuy from the same Suppliers,their Costs were no cheaper. Sysco adds three Value AddedService options. These add tothe Price and most Customersfind these options unattractive. With Sysco's three new ValueAdded Service options, plus theirbase Product and the SupplierSubstitute, Customers now have5 options to choose from. The Willingness To Pay (WTP) ofCustomers for the core Productplus the Value Added Services isaggregated together. Over 60% of Customers select tosave money by buying direct fromthe Supplier. By shifting the competitivedynamics away from just whichProduct has the cheapest Price,Sysco increases share by 5%.Value ofSupplier FoodBuy DirectSysco DistributionValue ofSysco DistributionBuyerAlternativesSuppliervs. SyscoResultsValue AddedServicesZero MinimumValue of ServiceBuy FromSupplier Directvs Sysco DistributionCreateFeature ListDataClean UpDataClean UpAdd NewSysco OptionsSupplier vsSysco andSysco OptionsCreateFeature ListNew AlternativesSysco OptionsSuppliervs. SyscoResults TotalRemoveNo SaleCustomersAppend ValueAdded ServicesCustomerDistributions Table Creator CustomerDistributions Product Generator Simulate Market CustomerDistributions Math Formula(Multi Column) Table Creator Feature TableTo List Column Filter Column Filter Table Creator Simulate Market Feature TableTo List Product Generator GroupBy Row Filter Column Appender

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Created by: Berlin
Created at: 2019-12-05
On NodePit since: 2021-02-05
Last update: 2024-04-27
Created with KNIME version: v4.3.0
Tags: Market Simulation

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