ExpertMedium2 marksMultiple Choice
Syllabus A: The business organisation and its external environmentSection ASyllabus APorter's Five Forces
ACCA · Question 04 · Syllabus A: The business organisation and its external environment
In the context of Porter's Five Forces, which of the following scenarios best illustrates a high 'Threat of Substitutes' for a commercial airline operating short-haul domestic flights?
In the context of Porter's Five Forces, which of the following scenarios best illustrates a high 'Threat of Substitutes' for a commercial airline operating short-haul domestic flights?
Answer options:
A.
A rival airline launches a massive price-cutting campaign on the same routes.
B.
The government completes a new high-speed rail network connecting major domestic cities.
C.
A new startup airline enters the market with heavily discounted fares.
D.
The sole supplier of aviation fuel significantly increases its prices.
How to approach this question
Differentiate between a direct competitor (same industry) and a substitute (different industry/product fulfilling the same need).
Full Answer
B.The government completes a new high-speed rail network connecting major domestic cities.✓ Correct
In Porter's Five Forces, a substitute is an alternative product or service from outside the industry. High-speed rail is a substitute for short-haul flights, whereas another airline is a direct competitor.
Common mistakes
Confusing 'Threat of Substitutes' with 'Competitive Rivalry' (another airline).
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