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E-commerce and Porter's Framework of Competitive Forces

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Identify an ecommerce company. Visit their site and analyze it using Porter's Framework of Competitive Forces. As you complete your review of the e-commerce website, what illuminations occur to you in light of Porter's notion of five competitive forces that influence strategy? What strategy recommendations might you make to those companies you reviewed as a result of your findings?

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Porter's framework of competitive forces can be used to evaluate the Netflix Company. Netflix is the world's largest e-commerce movie rental service with more than 23 million subscribers (Netflix, 2013). The company provides customers with DVD rentals by mail as well as instant streaming video. Netflix has raised the bar for home entertainment. The company was started in 1997 and competed mainly with Blockbuster Video and Hollywood Video. As on demand video technology evolved, most local and national video rental chains did not or could not keep up with the change in format. Netflix did, however. Netflix evolved as the market changed, adding instant streaming video. Meanwhile, as the economy as a whole worsened, home DVD rental became a more affordable option than going out to the theater. This further increased Netflix's allure. Wal-mart added online streaming and home DVD rental but even this massive chain failed to compete with Netflix, and eventually sold its online DVD rental business to Netflix (Associated Press, 2005). Most recently Netflix has been going after the cable television market by creating its own shows with top actors.

Netflix, as a result, does not have a great need to worry about the threat of new entry into the market place. The company has proven itself over and over again to be resistant in its adoption of new technology ahead of the competition, and to be proactive through innovation. In addition, the company has a large amount of customer loyalty. The company's new release "House of Cards" is available exclusively on Netflix and has prompted 86 percent of subscribers to be less likely to cancel (Lieberman, 2013). The company refuses to release viewing data for the series, yet ...

Solution Summary

This extremely detailed solution identifies an e-commerce company and analyzes it using Porter's Framework of Competitive Forces and their influence on the company's strategy. It also includes suggestions for strategy improvements. APA formatted references are included.

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Porter's five forces competitive framework - Online Retail Industry

Abstract

Walmart.comâ??s sales are less than a fifth of Amazon.com, but a new division, @WalmartLabs, is experimenting with social media and mobile apps. Since Wal-Mart Stores first ventured into cyberspace 15 years ago, the Bentonville, Ark., company has struggled online. Early on, Walmart.com featured a clunky digital version of the greeter who welcomes shoppers at each store. Walmart.com still doesn't excel at features that are commonplace on other major e-commerce sites, such as personalization and recommendations.

The company doesn't disclose its online sales, but analysts say Walmart.com does about $6 billion a year in business, less than 2 percent of total sales and well below Amazon.com's $34 billion in 2010 retail revenue. For a long time, Wal-Mart's poor online performance didn't much matter. The retailer built hundreds of Supercenters every year in the late 1990s, and profits soared. Over the past two years, however, the company has cut its new U.S. store development by half. Sales at domestic Wal-Marts open for at least a year have declined in each of the last eight quarters. Over that time e-commerce has exploded, even among the lower-income households that are Wal-Mart's core customers.

Chief Executive Officer Mike Duke has recently focused his company's considerable firepower (and an $11 billion cash hoard) on improving its use of the Web. He bought a Chinese online merchant, is testing home delivery of fresh groceries ordered online in San Jose, and most significantly, has created @WalmartLabs. Run by Silicon Valley veterans Venky Harinarayan and Anand Rajaraman, the division is charged with bringing Wal-Mart up to speed with innovations such as smartphone payment technology, mobile shopping applications, and Twitter-influenced product selection for stores. Itâ??s an ambitious attempt at a technological makeover, but still might not be enough. One goal of @WalmartLabs is to use social media and mobile apps to get shoppers to spend more at Wal-Mart's physical stores. One-third of Wal-Mart customers own a smartphone, and the company is investing in tools for them. The plans for increasing online sales are more vague. The @WalmartLabs division is testing an app that allows Facebook users to give gifts without ever clicking away from the social network.

Based on the above abstract from the article, Wal-Mart's Rocky Path from Bricks to Clicks, how to apply the porter's five competitive forces framework to the online retail industry? Using the Resource Based View of the firm framework, discuss Wal-mart's online strategy? From the perspective of Competitive Advantage framework, what is Wal-mart's online strategy?

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