Industry competition in the internet economy
The Impact on Competitive Rivalry
- Use of Internet widens a firms geographic market reach
- Rivalry is often increased by freshly launched e-commerce initiatives of existing rivals
- Rivalry is often increased by entry of enterprising dot-com rivals with sell-direct strategies
- Rivalry is often increased when an industry consists of online sellers against pure brick-and mortar sellers against combination brick-and-click sellers
The Impact on Barriers to Entry
- Entry barriers into e-commerce are often relatively low
- Can be easy for new dot-coms to gain entry into some businesses
- Can be easy for many existing firms to expand into new geographic markets via online sales
The Impact on Buyer Bargaining Power
- Use of Internet allows buyers to gather extensive information about competing products and brands
- Buyers can readily use the Internet to “shop the market” for the best deal
- Buyer efforts to seek out the best deal spurs competition among rival sellers to provide the best deal
- Internet makes it easier for buyers to join buying groups and store their purchases to negotiate better terms and conditions
Impact on Supplier Bargaining Power
- Helps companies extend geographic reach for the best suppliers
- Sometimes via online marketplaces or “emarkets”
- Helps companies collaborate closely with suppliers across a wide front—fosters long-term partnerships with key suppliers
Impact on threat on substitution of products
Internet fosters the R&D activity which in turn increases the threat of product substitutions.
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