Porter’s Five Forces Model

1 The current members of the industry, producing and selling the conventional product will worry about the newcomer, the technological breakthrough that might destroy their businesses. They will concentrate on dealing with that threat. Having said that, if the market for the conventional product shrinks because of the substitute than this could lead to increased rivalry as they fight over the decreasing market for conventional products. So, the question/answer is not entirely clear cut.

2 Always be suspect of absolutes such as ‘always’: it probably implies NO. Anyhow, I don’t really understand what the question is getting at. I think it might be saying that Company 1 has a range of 5 products, Company 2 has 4 products. There are a total of 12 products on the market. I don’t see why the total number of products always affects the rivalry between 1 and 2.