Analysis of the Impact of the Internet on Competition

​A Porter analysis will be performed throughout this paper, on the internet sales industry. Included in the Porter analysis is six relative competitive forces; threat of new entrants, rivalry amongst firms, threat of substitute services, bargaining power of buyers, bargaining power of suppliers, and relative power of other stakeholders.

The five forces used to analyze the level of competition formulated by Porter are the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products or services and rivalry among existing competitors (M. E. Porter, 2008). Two additional forces, proposed by Boehlje & Olson (2010), provide an external dynamic to Porter’s original five forces, namely technology and other drivers of change. In order to use the Porter five forces as an adequate backbone for describing the competition in our desired sector, we need thorough knowledge of the factors comprising these forces. We begin by providing an overview of general important factors used in recent literature.

In order to build relationships with its customers FIR needs to step away from the mind set that the use of the internet is no longer dominated by males and the women and older generations are moving towards the use of computers and handheld devices to conduct business. Fir needs to focus on internet security and protecting the interests of its clients and that the market is more competitive, “brick and mortar” banks have become more competitive in the use of internet banking along with the provided customer service.

The statements below are the impacts of the internet on the competitive landscape of corporate banking:

Banking industry is currently operating in the maturity stage. There are many players as a result of which the competition is quite high. Competition is broadly based on the levels of fees charged, reputation, the range of services and products provided. As the industry consolidates and the range of services broadens, the size and geographic spread of industry players in increasing. Providing a high set of barriers is the capital and regulatory requirements within the banking sector. Entities that want to start up as a commercial bank and/or investment bank or securities dealer face significant establishment costs in order to gain acceptance and meet market reputation. Furthermore, start-ups require up-front expenses in order to establish proper distribution channels. Globalization is high and the trend is increasing. Cross-border sales and acquisitions of banking operations are also occurring, as assets are shuffled in the race to raise capital.

According to Porter, in any industry or sector competition, there is in which Outcome of five forces of competition , where the use of these powers to develops a competitive advantage for the organization in order to help it outperform those of companies in the same industry. and with the following explanation of these forces and application in the banking industry at Barclays Bank .

o Technology: In a technology driven world, it is important that banks in the industry ‘move with the time’. With respect to the big four, these banks have now introduced internet and cell phone banking as well as banking from the ATM; making the industry highly competitive. This technology aims to make banking for the client simple and accessible from anywhere. This new technology is aimed, once again, at the medium to high-income earning clients, who have access to these technologies.

The use, acceptance, adoption and application of internet technology to businesses to boast their performances are not something new. Saffu et al., (2008), states that there has been a significant increase in the use and application of e-commerce in businesses in the past decade. E-commerce has benefits such as reduction in costs, increased business opportunities, reduced lead time and providing more personalized service to the customers (Turban et al., 2008). Internet banking or e-banking is one of the many tools of e-commerce adopted by the banking industry. Tools of information technology such as internet banking have significantly improved the quality of services offered by the banking

The Five Forces was first described by Michael Porter in 1979 in a Harvard Business Review. The model is divided into 5 categories; Rivalry of competitors, Suppliers, Buyers, Substitutes, and Potential entrants (Walker, G. 2009). The Five Forces framework explains the average prices and costs of the industry, and therefore the average industry profitability the company should beat. The Five Forces analysis answers key questions such as what is going on in the industry or what matters for competition (Magretta, J, 2012). It jointly determines the attractiveness and benefits of an industry competition (Porter, M. E. 1980). The model shows how the trends will affect the market’s competition, which industries should a company compete in, and how they can position themselves for prosperity (The Five Forces, n.d.). The purpose of the Porter Five Forces is to help companies face these potential threats so they can become more successful in creating strategies to neutralize them (Rice, J. F, 2010). Michael Porter’s model directly tells how the market industry

that will create a level playing field for the well established companies as well for the startup companies. Moreover, critical yet universally beneficial pieces of information would be stored in these banks that would be accessed by other facets in a restricted environment thereby creating a win-win situation for the owner as well as for the user of the information. Because of the impetus provided by the 7th Generation technology that can make the internet work at a speed that can only be imagined of today, the world of business would witness a massive surge in online trade. From buying Bugattis to selling samosas, the internet would be the undisputed

We limited our analysis to existing competitors and threat of new entry, the most relevant aspects to the analysis. Rivalry among competitors is high as credit cards and loans compete by lowering interest rates and annual fees. The largest players set their interest rates directly to indexes along with market rates. These players offer online banking services to make their services more convenient for consumers. Threats of new entry in the market is low with presence of strict

In response, financial institutions, who once viewed technology mainly as a cost center, now see the Internet and other technological capacities as strategic tools for enhancing the value of customer relationship through cross-selling and improved customization. A recent survey of bank managers in the United States reported that, for the first time, investment in Internet

The structure of the banking industry has undergone sweeping changes in the past two decades. In response to heightened competition from non-bank financial firms enabled by technological progress among

“Internet banking” refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent device.

The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and