As per www.businessdictionary.com
Substitute goods: Different goods that, at least partly, satisfy the same needs of the consumers and, therefore, can be used to replace one another.
Competitor: Any person or entity which is a rival against another. In business, a company in the same industry or a similar industry which offers similar product or service.
The Product itself is a substitute, while the producer is a competitor.Eg. our competitor is Coco Cola & co, while the substitute is Coke.
what do u think ?? did i get it right ??
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34 comments:
substitutes, i think, may or may not be competitors.. for instance, corn syrup and sugar do not compete against each other but are certainly substitutes. the link may be helpful in explaining the point further.
http://www.learnpremium.co.uk/CIMA/lesson3/page4.aspx
Substitute should be divided in two parts.
1. Industry Subtitute
For e.g. instead of having wooden door we take aluminum doors so we r switching industry that is aluminum instead of wood.
2. Product Substitute
For e.g. ufone user can use mobilink as his network with same function
so in Industry substitute the function also changes but in product substitute the function remains same but brand changes
i was very much clear about the terms competitors and substitute but the example given really confused me and now i found myself lost............ :(
can someone plz explain me that example?????
@ Salman, basically while analyzing the industry we have to check the substitute that doesn't come in that industry as wood industry and aluminium industry both are different
secondly while finding out the product substitute we have to find the same item with same function and in same industry which that example is telling that Mobilink and Ufone both have same functions and same industry but if i don't like Ufone packages then i may go with Mobilink
I'll have to disagree with Adil on the point that we have to consider the industry while looking for a substitute. They can exist elsewhere as well. If you consider wood and aluminium as you have stated, they are both construction materials and can be used individually. Obviously the need satisfied will be different. But the function would be the same.
Substitute well that two goods having similar characteristics the decrease in the price of good 'A' leads to an increase in the demand for the good 'B'.
So the product itself substitute.
When same thing will happen to good 'b'.
For example a company ( Nokia ) is producing mobiles phone .
Many models are available . Which are similar in their function but their look is change. ( Nokia 2700 and Nokia 5130 somehow)
A persona switch from one mobile phone model to other , because the other model is the substitute of the principle model u have .
Producer ( Nokia ) is competing within different mobile phone models.
@Irfan plz also identify the industry substitute of Nokia
no... substitutes are are usually industry specific. like corn syrup and sugar as we studied in class.. they belong to different industries. substitutes are usually products from different industries performing a similar function. mcdonalds is a competitor to kfc but it is not a substitute i think (the industry is the same), however, made to order restaurant food, or home made food are definitely substitutes: they performs the same function: satisfy hunger.
Yes, Samia is right. A substitute has to be a 'different' kind of product. It serves the same purpose but in a different way. E.g. solar panels are substitutes to the conventional water produced electricity. And Coke is not a substitute for Pepsi, it is manufactured by another company but the product itself is the same. I will give a few more examples of substitutes:
Product: Typewriter
Substitute: Computer
Product: Trains
Substitute: Airplanes
Product: Regular post
Substitute: E-mail
Product: Curtains
Substitute: Blinds
Product: Quill
Substitute: Pen
Product: bulb
Substitute: Candle
Hope this clears up the confusion
@ Rehan
The confusion has been removed, the concepts have been cleared. But can it be that there exists some product which does not have a substitute? I dont have any examples in my mind at the moment but I will definitely try to come up with some.
@Rehan You are talking same..... all your examples are clearly identifying the different industries which are fulfilling the same purpose
@ Samia your example is also right but if we dont want KFC or Mcdonald and take Daal Chawal then it is the product substitute dut industry has also changed
I think i am not wrong!!!!
While making the project of Interwood I find some difference between substitute and competitors.
We all know interwood is specialized in door, wardrobes and flooring. Interwood decorate ur floor with wood. And Chenone sigma Mukhtar are its competitor but they offer same thing and want to compete with Interwood. But substitue product are those product that replce to another. for example carpets, marbel flooring, tiles are replaced by wood flooring so these are its subsitute.Marbles industry another industry but it is substitue of wood flooring
@ irfan Yar i am also agree with u that what u said, to support you i will provide an example of Coca Cola Co.Sprite is one its product and the tag line of sprite is "Sprite Lao Piyas Bhujao" it means that sprite target on that audience who want to remove its thirst but kinley is also one of its product and also its substitue becoz it also rmove thirst. so both has a same function.
A customer switch from sprite to kinley , because kinley is the substitute of sprite.
so as irfan said that
Producer is competing within different products.
@ irfan i don't agree with you. A company never produce goods as a subsitute for their own other products as you said about Nokia. I think this is the company strategy to make such products that attract more customers and capture more market share.
Nokia make both expensive and lower price mobile so it doesn't mean that Nokia make lower price mobile as a substitute for expensive mobile. Its mean that Nokia targets both upper and middle class cutomer through diffrent mobile sets..
Burraq i appreciate but you take my example in opposite way .
u r talking about target market by doing segmentation.
The different mobile phones are not substitutes for each other. They are just different models of an item (mobile phone) that serves the same purpose, to keep in touch with others.
@Rehan
he has solved the confusion and made a clear difference between product and substitute that makes our mind clear
I completely agree with the definition that substitutes are more products focused and competition is among businesses. Talking about the substitutes, Rehan has given classic examples.. and the most important statement that " substitutes serves the same purpose but in different way"
Substitutes are products that serve serving the same purpose as the company's product.
I think substitutes can exist within the same industry as well. We can call them perfect substitutes. So, we can say that Pepsi is a perfect substitute for coca-cola. Also, water can be a substitute of Pepsi.
@ zari
i dont think so the pespi is the substitute of Coca cola because according to definition it is the competitor..they are offering the same products fo full filling the need of the consumer
@ adil.. the reason why i said substitutes are industry specific.. both KFC and daal chawal are substitutes because they are from different industries..
yes bhalli.. pepsi and coke are not substitutes.. they are fulfilling a similar need in the same manner. substitutes provide a similar function but in a different manner.
@ Mughees
what if any company introduce mobile with new features except call and sms...?
Substitute is something which can be used in turn of the any particular thing.e.g Mithai can be substituted with Sweets and Cakes But the Competitors are those who use these Substitutes in consideration to have effecitive strategy to attract and retain customers.
Substitute is something which can be used in turn of the any particular thing.e.g Mithai can be substituted with Sweets and Cakes But the Competitors are those who use these Substitutes in consideration to have effecitive strategy to attract and retain customers.
Substitute is something which can be used in turn of the any particular thing.e.g Mithai can be substituted with Sweets and Cakes But the Competitors are those who use these Substitutes in consideration to have effecitive strategy to attract and retain customers.
@ samia....
yup...coke and pepsi are not substitutes for each other...they are almost same products....RIGHT??
what about Water a substitute for coke...i mean Does it work????
i dont think so...water is a substitute for coke or pepsi,example given by zari...
is it??
may i ask you a question? in what way can stakeholders group affect competition?
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