Pressures from Substitutes
As with the threat of entry, the more potential substitute technologies or solutions to customer problems are available and the more value they offer, the greater the chance that price competition will exist.
Unused Capacity
Capacity is particularly important in a high-contribution-margin (price less variables cost) product category. These markets are characterized by some of the most vicious price battles (e.g., airlines) because there is plenty of margin over variable cast to give and the product need to generate revenues to cover fixed costs. When economies of scale are important (e.g., in automobile manufacturing), overcapacity also leads to price wars because the degree of capacity utilization directly affects unit costs.