The availability of substitutes is essential for several reasons:
Competitive Pressure: Companies with numerous substitutes face higher competitive pressure. They must continuously innovate, improve quality, or reduce prices to maintain market share. Pricing Power: The more substitutes available, the less power a company has to set prices. This is because consumers can easily switch to a competing product if the price of one product rises. Consumer Choice: Increased availability of substitutes gives consumers more options, leading to higher satisfaction and better matches for their preferences.