How do Porter's five competitive forces affect companies that compete primarily on the internet? Provide example.
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1. How do Porter's five competitive forces affect companies that compete primarily on the Internet? Provide example.
Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell on-line would analyse the on-line market for Business Computers i.e. one of its SBUs.
Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. Each of these applies equally to the on-line market.
The threat of entry -
· Economies of scale e.g. the benefits associated with bulk purchasing.
· The high or low cost of entry e.g. how much will it cost for the latest technology?
· Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up?
· Cost advantages not related to the size of the on-line company.com e.g. personal contacts or knowledge that larger companies.com do not own or learning curve effects.
· ill competitors retaliate?
· overnment action e.g. will new laws be introduced that will weaken our competitive position?
· ow important is differentiation? e.g. The Champagne brand cannot be copied. This desensitizes the influence of the environment.
The power of buyers - ...
This solution explains how Porter's five competitive forces affect companies that compete primarily on the internet through discussion and examples.