Is Pepsi Cola a Substitute for Coca Cola

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Examlex · Accepted Answer

The Answer is This is a good question to check how well students understand the basic concepts of industry analysis. Those with a very superficial understanding of the topics discussed in this chapter will tend to answer "yes" to this question. They are using their own common sense understanding of a substitute being another product within the same category. Because Coke and Pepsi are both colas, most people think of them as substitutes for each other. They have almost identical product characteristics. According to Porter, however, substitute products are those products that appear to be different but can satisfy the same need as another product. This means that in Porter's mind, substitutes do not have similar product characteristics, but are still able to satisfy the same need. This indicates that Porter would not view Pepsi and Coke as right substitutes, but two versions/brands of the same product. Thus, Porter would view coffee and tea (both having caffeine) as being substitutes for a soft drink cola. The whole idea of Porter's approach to industry analysis is to get people to go beyond the obvious when considering what affects the level of competitive intensity within an industry.

Is Pepsi Cola a Substitute for Coca Cola

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