Case Study on American Home Products

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Date Submitted: 02/22/2011 03:08 AM

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American Home Products Case Study

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American Home Products Case Study

Grant Nauta   AHP Case Study   Because American Home Products (AHP) currently operates with virtually no debt, their financial risk is very small. This shifts the burden heavily towards business risk. A porter’s five forces analysis is appropriate to determine the exact levels of business risk for American Home Products.   First, the threat of substitutes is a risk that AHP cannot afford to ignore. Because they spend very little on Research and Development, and have to rely on their marketing to catch up to competitors, they always seem to be a step behind their competitors. In the industries that AHP operates, switching costs are very low and consumers based on anything from price to overall sentiment. Also, if a competitor markets a product more heavily than they do and creates a perceived level of product differentiation, this could harm demand for their products as well. Based on all of these facts, I would argue that the threat of substitutes is high.   Next, the threat of entry

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