Porter’s Five Forces Model and Internet Competition

Based on Porter’s five forces model, in my opinion, competition has generally increased as a result of the Internet and e-commerce. The Internet and information technology have made it possible to focus on both revenue and results, expanding market share and reducing costs. Many products and services exist only online, major companies have gone online to successfully grow physical corporations, and the playing field reaches the limits of cyberspace, wherever it may be. We will further evaluate this step through the five forces.

Buyer power is greatest when buyers have more options. Companies are forced to add value to their products and services in order to retain them. Many loyalty programs include excellent services that customers demand online. Customers want to solve their problems and are often more successful online than on the phone. In addition, we see Internet savvy companies emerging that offer more valuable goods and services at lower costs. Now, with the advent of eBay, many people are taking on roles as direct senders. People can have a thriving business selling products from larger companies without having to carry inventory.

Supplier power is greatest when buyers have fewer options from whom to buy. As mentioned above, drop shipping has increased the number of providers available. All an individual has to do is train and agree to sell products for the business. The company takes care of all logistics. The same is true of the partner programs offered by Amazon.com and Google.com. Associates allow a webmaster to earn money by recommending others’ products. This increases the offers of the providers.

The threat of substitute products or services is high when there are many product alternatives. This is different from having many providers. Examples of alternatives are swapping brand names, substituting credit card capabilities, and seeking better values ​​from cheaper sources. The Internet enables this with the “global economy”. I can substitute my product by buying it from foreign companies where labor, services and products are cheaper, but of comparable quality.

The threat of new entrants is high when it is easy for new competition to enter the market. Well, what have we been talking about? Now, small operations can open a store on less than $ 10.00 per month and make a lot of money. No matter how inventive people are, there are always opportunities to improve a product or service or simply create and sell something new. Recently, many new entrants have made even more money by creating e-books that tell others how to do what they did. Rivalry between competitors is high when competition is most intense within industries.

Online bookstores and catalog companies are a great example. Amazon.com and Barnesandnoble.com are very competitive. However, there are also many smaller niche affiliate bookstores that, when combined, get a huge market share. They offer even more competition. However, the two large bookstores have used information technology to create value for their customers. These values ​​include partner programs, ease of checkout, and many, many others.

The Internet offers avenues of competition for existing businesses and opportunities for start-up. Now companies can enter the online market with few barriers to entry. Porter’s Five Forces Model can help demonstrate the attractiveness of starting your business online. A business person should use the model to identify the competition, make a plan, and implement the process.