A higher price would propel the customers to look for other options. The target market is sensitive to price changes, therefore the company canвЂ™t charge a premium price for the electronic products available in store. The customers of Best Buy are individuals who are looking for computers and other electronic items in reasonable price. The bargaining power of the customers of Best Buy can be identified as low. Therefore, the threat of new entrants is low and Best Buy is taking the benefit of having a major share in the market in US, Canada and Mexico (Best Buy, 2018). This is one of the reasons why retailers are hesitant to enter the consumer electronics market. The handling of electronic goods requires effective supply chain processes, which is challenging to achieve with limited budget. As far as consumer electronics retail industry is concerned, businesses planning to enter in this sector need to have major capital funds to purchase electronic items, along with managing the logistics and after sales component of the supply chain. The threat of new entrants is defined by the investment needed to set up a new business, ability to attain economies of scale, the governmentвЂ™s regulations etc. The following section entails analysis of Best Buy and its industry dynamics using PorterвЂ™s five forces model. An investor would want to watch for increases in the threat over time, since changes in this direction could lead to a decline of profitability within an industry.Best Buy is a US based retailer which supplies electronic items to the consumers, with main focus on home theater and computer related items. Investment Interpretation of the Threat of SubstitutesДЇrom the perspective of an investment analysis, an industry is a better prospect for investment when the threat of substitutes is low, since firms within the industry have a higher potential to earn an above-average profit. Another possibility is to identify those customers who are most likely to shift to substitutes, and target them for enhanced service and marketing efforts, so that they are aware of the particular value that the organization brings to them. Or, it can focus intently on specific market niches, so that the value it offers to customers within those niches exceeds the value that customers can obtain from substitutes. For example, it can inspire brand loyalty through its marketing efforts, product quality, and support services. There are a number of ways in which a company can mitigate the threat of substitutes. Substitute products have lower costs than comparable products within the industry. Substitute products have higher quality/reliability than comparable products within the industry. Substitute products have better features than comparable products within the industry. Substitute products are readily available to customers. The following factors cause a higher threat of substitutes for an industry:Д¬ustomers can easily switch between products. What Causes a Higher Threat of Substitutes? Thus, firms tend to generate higher profits at the expense of their customers. Because there is little prospect of competition from outside the industry, there is a higher potential for profits within the industry. When there is a reduced threat of substitutes, industry players tend to be more lax with their cost controls, resulting in higher prices charged to customers.

When there is a strong threat of substitutes, industry players must pay more attention to operating in the most efficient manner possible otherwise, their high cost structures will interfere with profitability and may drive some firms out of business. In this case, price points are limited by the prices at which substitutes are available, thereby limiting the amount of profitability that can be generated within an industry.

The competitive structure of an industry is threatened when there are substitute products available that offer a reasonably close benefits match at a competitive price. The threat of substitutes is the availability of other products that a customer could purchase from outside an industry.