Porter’s Five Forces Model – The Internet Industry
The following table is an example of the Porter’s Five Forces Model applied to the Global Internet & Services Industry. I explain the industry infrastructure of Internet companies like Google Inc. according to the threat of entrants, buyer power, threat of substitutes, supplier power, and rivalry.
Threat of New Entrants
There is a moderate degree of new entrants into the global internet and services market. It is a very labor intensive industry while depending mostly on highly skilled employees. Overall though, it is a desirable industry to be in. Innovation/technological change, and R&D investment is very important so for potential new entrants it would require a large initial investment. Government regulations and large startup costs may deter new entrants but overall it is an attractive industry.
There is a moderate amount of buyer power in this industry. Revenue for companies such as Google are generated by their advertisements. This business model gives control to the buyers who use those services and “click” on those advertisements. In this case, revenues from advertising are heavily dependent on the amount of people using the software and services. On the other hand, the market players enjoy a wide variety of potential customers, in turn weakening buyer power.
Threat of Substitutes
The threat of substitutes is weak. Substitutes in this industry are considered as the more traditional outlets like, print and TV. Leaders in the internet and services industry pose more of a threat to those media outlets, than they do to Google, or other leaders.
Supplier power in this market is strong. Supplier power for Google isn’t very strong because they use their own software and hardware infrastructure. As for other market players, hardware components are usually...