In Porter's model, the threat of substitute products specifically refers to products in other industries. Therefore in Dell's case, this threat does not refer to other PC products, as produced by IBM, or HP, etc. According to Porter's force definition (Porter, 1980) a threat of substitute products exists when a product's demand is affected not by the price change in a competitor's product, but by the price change of a substitute product. According to QuickMBA the "competition engendered by a Threat of Substitute comes from products outside the industry. The price of aluminum beverage cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the aluminum can industry."
One of the first issues Dell should address in order to keep customers loyal, and not looking for substitute products are its customer service and product reliability records. According to ConsumerAffairs.com, Dell is the highest among domestic computer makers in customer complaints. ...Show more