Final answer:
Substitutes increase competition in an industry according to Porter's Five Forces, which typically leads to decreased industry profitability as companies may lower prices or enhance product quality to maintain market share.
Step-by-step explanation:
The impact of substitutes on industry profitability, according to Porter's Five Forces, is that they increase competition within the industry. Substitutes offer consumers alternative options to the industry's products, potentially drawing customers away from the industry and forcing companies within the industry to either improve their product quality, decrease their prices, or both. This increased competition over market share tends to decrease industry profitability as firms may engage in price wars or need to invest more in marketing or innovation to maintain their customer base. On the whole, the presence of close substitutes puts pressure on the profits of the companies within the original industry as they vie to keep their market position.