Substitute Case Study

• Threats of substitutes

It is that consumer can purchase another product which is available instead of the product of our industry. This substitute product offers same advantages for customers as our industry product. Substitution threat appeared in the industry competitive structure according to porter five forces. In addition, it affects the industry profitability as consumer would prefer to buy the substitute product more than our industry’s product. If there is a close substitutes products, this lead to reducing profits and increase competition for the companies in the industry. There are four factors under threat of substitutes which are substitute availability, product quality, product price and product performance. (strategiccfo website)

According to the report, in prepared baby food, hero has high distribution compared to other companies, which are Gerber and Bio Bambini. Hero’s value share decreases by 12% in 2017 from shares in 2016 as it became 63%. This decrease in the value share is due to devaluation of Egyptian pound which lead to increase in unit prices. This also leads to decrease in demand of prepared baby food (Baby Food in Egypt, 2017). The other substitute is milk formula in which Wyeth S-26 has more value shares which is 23% than Babelac which is 16% and Nan which is 9% in 2017. Wyeth S-26 has high quality to meet infant’s needs and also it has in Egypt strong distribution channels which lead them milk formula number one brand. Organic food is one of the substitutes as it is stated in the report that people in Egypt become aware of the organic food as a healthy food for their children. On the other hand, nestle has 46% value shares. The first factor of substitution threat is substitute availability. This means that there is a huge availability of the substitutes especially Hero as it is 63% from value share after it S-26 also available with medium value share as we see 23% (Euromonitor, 2017). This two are the more available substitute to Nestle and has higher value share than the others. So according to the value shares founded, substitute availability is