The "Threat of Substitutes" refers to the risk that customers may choose alternative products or services that fulfill the same need. For example, if a company sells soft drinks, the availability of water or juice as alternatives can impact its sales. When substitutes are readily available and affordable, businesses must remain competitive to retain their customers. This threat is influenced by factors such as price, quality, and consumer preferences. If substitutes offer better value or unique features, customers may switch, leading to decreased market share for the original product. Companies must continuously innovate to mitigate this threat and maintain customer loyalty.