Poter's Five Forces Model E-Commerce

Porter has identified five (5) competitive forces that shape every industry and every market. The forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Based on the information derived from this analysis, management can decide how to influence or to exploit particular characteristics of this industry.

The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through head-to-head competition. The most valuable contribution of Porter's “five forces” framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness.

This has given birth to E commerce which encompasses several pre purchase and post purchase activities leading to exchange of products or service or information over electronic systems such as the internet and the other Telecommunication networks.

Porter’s Five Forces is defined as threats of new entrants, bargaining power of suppliers, power of buyers, the threat of substitutes and rivalry among existing competitors. New entrants into the industry aim to gain market share from rivals, so the intensity of competition may require to make changes on current strategy of marketing to maintain existing market share. The bargaining

Defining an industry can be described as drawing a line between the established competitor and the substitute products offered by competitors outside the industry (Porter 1998). “Porter’s five forces provide a framework for an industry and business strategy development to drive the five forces that determine the competitive intensity and attractiveness of a market. The Porter’s Five Forces model helps identify where improvement can be made regarding competitive forces, threat of potential entrants, bargaining power of buyers, and bargaining power of suppliers and threats of substitute products.

E-tailing, short for electronic retailing is the sale of retail merchandise over the internet. There are many factors that beckon different behaviors in e-tailing ( Searchcio.com, 2011 ). It is the new wave of the world today. As technology steers our habits toward electronic commerce, it affects different behavioral aspects for both e-tailers and their customers. E-commerce, short for electronic commerce, is the buying and selling of goods and services on the internet

E-commerce Explain what is meant by the term ‘E-commerce’. It is the conducting of business communication and transactions over networks and through computers. As most restrictively defined, electronic commerce is the buying and selling of goods and services, and the transfer of funds, through digital communications. However EC also includes all inter-company and intra-company functions (such as marketing, finance, manufacturing, selling, and negotiation) that enable commerce and use electronic mail, EDI, file transfer, fax, video conferencing, workflow, or interaction with a remote computer. Electronic commerce also includes buying and selling over the Web, electronic funds transfer, smart cards, digital cash (e.g.

Electronic commerce has been there for a long time now, and it is a practice that is practiced by peoples from Germany, France, and the US on a daily basis. Since its inception around 40 years ago, e-commerce has continued to grow as innovations, technologies and a lot of business reverting to the use of the e-commerce. The aspect of buying and selling of goods in the early 1960s was sluggish with the traditional way of mailing of documents being replaced with the Electronic Data Interchange (EDI), which would later pave a way to the electronic commerce. After the e-commerce, however, the practice was not more reliable as it still had many challenges (Tsolis, 2009). For instance, it was not easy for buyers to see products from the comfort of their homes and more so, the methods of accessing the information were limited.

Competition is a fundamental factor in whichever industry. Hill and Jones (2007) note, “the power wielded by suppliers, the influence of the customers, and the threat posed by new and existing competitors determine the profitability levels in a company”. Besides, the forces support the decisions made by firms in order to improve their competitive position. In this regard, it is essential to review these forces either individually or as a combination to arrive at an informed decision on the industry choice. Further, it is fundamental to note that a force is either classified as strong or weak and, as a result, is a threat or opportunity respectively.

E-commerce is transactions conducted via electronic means such as the internet, email and SMS. It is considered to be one of the most important aspects of the internet to appear. As a result, people are able to exchange goods and services immediately regardless of their geographic location and time. More and more businesses conduct transactions on line, with some trading purely on-line thus reducing overheads and administrative costs.

The continuous development of Internet leads to the growth of e-commerce. The electronic commerce is growing constantly due to the continuously increasing number of mobile and online users in the market, primarily the emerging markets. Besides that, the development of the Information Technology (IT), such as the advance of paying processes and the improvements of shipping method also the main reason to cause the growth of electronic commerce (John Ingham, 2015). Most consumers accept e-commerce as their feasible alternative in the purchase of goods and

According to Michael Porter, “Every industry has an underlying structure, or a set of fundamental economic and technical characteristics, that give rise to these competitive forces” (Porter 1998:23). The forces mentioned above are: industry rivalry, threat of new entrants, threat of substitute products, bargaining power of suppliers and bargaining power of buyers. Additionally, Porter mentioned that: “Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda or action” (Porter 1998:22).

Electronic commerce (e-commerce) over the Internet is the fastest growing method for consumers to conduct business. Less than ten years old and it already has radically altered the potential to economic activities and the social environment. There are nearly 200 million Internet users worldwide currently. Of these 200 million users, roughly 40 percent reside in the United States (Styliano, A., Robbins, S. & Jackson, P., 2003). E-commerce currently affects large sectors such as communications, banking and the retail industry. E-commerce has also had an effect on the education, health and government (Wyckoff, A., & Colecchia A., 1999). It is predicted that commerce on the Internet could total tens of billions of dollars by the turn of the

In 1979, Michael E. Porter published an article on the competitive forces that shaped business strategy (Prasad & Warrier, 2016). From then on, people named the model as Porter’s Five Forces. Most use Porter’s Five Forces to determine an industry’s structure and its potential profit, opportunity, and risk based on the competitive forces that are affecting it (Porter, 2008). There are five competitive forces in Porter’s model. The first one is the competitive rivalry among existing firms. Firms that are aggressive to gain a competitive advantage will create a high level of competitive rivalry and drive profit down. When the level of competitive rivalry is high, entering firms will need to be more aggressive than the

The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time the ‘five forces tool’ has become an important method for analyzing an organizations industry structure in strategic processes.