The Threat of New Entrants
The Power of Suppliers
Degree of Competitive Rivalry
Introduction Before venturing into the online retail industry you need to be able to answer yes to the following questions. Are you entering an industry in which product development and innovation (as opposed manufacturing and marketing), play a central role in bringing products/services to markets? Is the industry structure highly fragmented and favourable for start- ups? (Shane 2003) In the following paper, by using the Amazon.com start up case study (1995-2004) as an example, I intend to describe the online retain industry, with a view to starting a business in this arena. I intend to investigate competitive rivalry using ‘Porters Five Forces Framework’ to describe how each forces impacts business choices, either positively or negatively and therefore increasing/decreasing competitive rivalry. 1. The Threat of New Entrants
The internet reduces barriers to entry such as the need for a sales force, access to channels and physical assets. New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. New entrants can develop their web sites in a short period of time with incredible final results. This can be the proof that a threat of new entries into the market is possible. The internet mitigates for such things as an established sales force or access to existing channels, reducing barriers to entry (Porter, 2001) - Economies of scale: In some industries, economies of scale are extremely important. However, startup costs for e commerce retail operation are a fraction of the costs of starting a traditional brick and mortar company. - Access to industry distribution channels: In many industries manufacturers have had control over supply and/or distribution channels. In the online retain... [continues]
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