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Hello,
I think internet services increase the bargaining power of buyers and sellers. because buyers can improve their marketing activities and expand their market area. also sellers can find better offers in an easier way. also those competitors who try to enter in market as new enterants will find and gather required information to develop much better strategies. however on the other hand internet can help us to have a better control on our strategies and activities.
please share your idea with me. it is very valuable.
The Internet has created some new industries, such as online auctions and digital marketplace. However, its greatest impact has been to enable the reconfiguration of existing industries that had been constrained by high costs for communicating, gathering information, or accomplishing transactions. The following outlines some clear trends of how the internet influences each of the five forces shaping the structure of any industry.
1. Rivalry among existing competitors
- Reduces differences among competitors as offerings are difficult to keep proprietary,
- Migrates competition to price,
- Widen the geographic market, increasing the number of competitors,
- Lowers variable cost relative to fixed cost, increasing pressures for price discounting.
2. Bargaining power of suppliers
- Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give suppliers access to more customers,
- The Internet provides a channel for suppliers to reach end users, reducing the leverage of intervening companies,
- Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurement to standardize products that reduce differentiation,
- Reduce barriers to entry and proliferation of competitors downstream shifts power to suppliers.
3. Bargaining power of buyers
- Eliminates powerful channels or improves bargaining power over traditional channels,
- Shifts bargaining power to end consumers,
- Reduced switching costs
4. Barriers to entry
- Reduces barriers to entry such as the need for a sales force, access to channels, and physical assets – anything that Internet technology eliminates or makes easier to do reduces barriers to entry,
- Internet applications are difficult to keep proprietary from new entrants,
- A flood of new entrants has come into many industries.
5. Thereat of substitute products or services
- By making the overall industry more efficient, the Internet can expand the size of the market,
- The proliferation of Internet approaches creates new substitution threats
What do you mean first by the five forces shaping an industry structure?
Please clarify.
