Threat of Substitute

The threat of a substitute is a level of risk that a company faces from replacement by its
substitute. A substitute product can offer many and similar benefits to a company as a product
from another industry. Companies that produce goods or services in which there are no
substitute tends to have more power in increasing prices so thus when a substitute goods are
pleasingly available for the customers, they opted to go and buy the other company’s products.
To discover those alternatives, customers look beyond those similar products that are branded
differently and advertise extraordinarily by competitors. The product that the rival company
offers creates higher risk for the company.

 Substitute products available

 Buyers tendency to substitute
 Price vary of the substitute products
 Level of product differentiation
 Cost of production

As to Milktea, substitute goods are highly at risk because there are many alternatives in which
customers opted to forgo. As to the Welltea, its substitute products could be other milktea shops
(eg. Happy lemon, I love Milkte and etc.), Frappes (eg. Starbucks, Tim Hortons, Coffee Bean
and Tea Leaf), Shakes (eg. Zagu) and all specific substitute for milktea whether it is from small
or big companies. Somehow, some tends to build a substitute goods eventhough they are not
engaging into tea-based business like Fruitshake (eg. Fruitas) and detox water drink in which
offers a healthy content rather than to others specified.

The main issue will always be the buyer preference because it will be easier for them to switch
from one to another, the level of price variances and will always be the advertisement as to the
internet has allowed customers to be vigilant and updated so it is powerful. Every product that
serves similar needs are important hence, it will always be essential to know and recognize the
existence of other goods to plan and to form a strategic planning to keep the customers at bay
and to attract more customers.

References:

Threat Of Substitutes: Porter's Five Forces Model. (2019, September 18). Retrieved from
https://www.cleverism.com/threat-of-substitutes-porters-five-forces-model/#targetText=Threat
Of Substitutes | Porter's Five Forces Model&targetText=A substitute product is one,from
replacement by its substitutes.
Chappelow, J. (2019, August 27). Porter's 5 Forces Definition. Retrieved from
https://www.investopedia.com/terms/p/porter.asp#targetText=Porter's Five Forces is a,products
influence a company's profitability.