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Internet & E-Commerce

This analysis explores the transformative effect of the Internet on e-commerce strategies and industry structures. By leveraging Porter’s Five Forces framework, we examine elements such as the threat of new entrants, buyer and supplier bargaining power, and competition rivalry. The Internet enhances efficiency, opens new markets, and intensifies price competition, leading to an ever-changing landscape. Additionally, we assess disintermediation and reintermediation processes and their implications for intermediate roles in e-commerce transactions.

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Internet & E-Commerce

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  1. Internet & E-Commerce MGMT 3280 Strategy

  2. Internet Use Worldwide

  3. TRANSPARENCY-70 Exhibit 8.1 Growth in Internet Shopping Activity Data: Forrester Research Inc.

  4. Porter’s Five Forces • Threat of New Entrants • Bargaining Power of Buyers • Bargaining Power of Suppliers • Threat of Substitutes • Rivalry of Competitors

  5. TRANSPARENCY-74 How the Internet Influences Industry Structure (+) By making an overall industry more efficient, the Internet can expand sales in that industry. (-) Internet-based capabilities create new substitution threats. Threat of substitutes (-) Technology-based efficiencies can be captured, lowering the impact of scale economies. (-) Differences among competitors are difficult to detect and to keep proprietary. Buyers Rivalry among existing competitors Bargaining power of suppliers Bargaining power of channels Bargaining power of end users (-) More price-based competition intensifies rivalry. (-) Widens the geographic market, increasing the number of competitors. (+/-) Procurement using the Internet may raise bargaining power over suppliers, but it can also give suppliers access to more customers. (-) The Internet provides a channel for suppliers to reach end users, reducing the power of intermediaries. (-) Internet procurement and digital markets tend to reduce differentiating features. (-) Reduced barriers to entry and the proliferation of competitors downstream shifts power to suppliers. (+) Eliminates powerful channels or improves bargaining power over traditional channels. (-) Shifts bargaining power to consumers. (-) Reduces switching costs. Threat of new entrants (-) Reduces barriers to entry such as need for a sales force, access to channels, and physical assets. (-) Internet applications are difficult to keep proprietary from new entrants. (-) A flood of new entrants has come into many industries.

  6. Cost Leadership Strategies • Hiring new employees • Meeting with customers • Ordering supplies • Addressing government regulations • Answering RFQs

  7. Differentiation • Mass customization • Flexible manufacturing systems

  8. TRANSPARENCY-73 Exhibit 8.4 Disintermediation and Reintermediation TRADITIONAL INTERMEDIATION Manufacturer Wholesaler Retailer Consumers DISINTERMEDIATION PROCESS Manufacturer Wholesaler Retailer Consumers Manufacturer Consumers REINTERMEDIATION ElectronicIntermediaries Manufacturer Consumers

  9. Sustainability of E-Commerce Advantages • ? • Combination strategies

  10. Focus/Guerilla Strategies • Examples • E-bags

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