Strategy and the Internet

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Brief Summary

Companies must distinguish themselves through the strategy to survive, especially those involved in e-commerce. Many will argue that the internet technology has rendered strategy obsolete, but Porter argues that it is just the approach that has changed. He says "the time has come to step back and take a clearer view of the internet," he calls that marketers return to the basics of business. Porter claims that the internet has not brought any thing new; it just changes the approach that must be taken to remain competitive.

There are two fundamental factors that determine the profitability of business in today's technological driven business: Industry structure and creating a sustainable competitive advantage. The internet has created some new industries that have revamped internet market structure, such as on-line auctions and the digital marketplace. Porter says "whether an industry is new or old" it still faces the five underlying forces of competition 1.Barriers to entry

2.intensity of rivalry among competitors
3.Threat of substitute products or service
4.Bargaining power of suppliers
5.Bargaining power of buyers
All of these areas are affected by internet technology, affecting different industries in different ways. Porter says that some of these trends are positive, by boosting efficiency and market size, but most are negative.

There are also many different influences present on the industry structure. These influences will eventually make the markets more efficient, expanding the size but the internet will always allow for substitute products, equal access to suppliers, reduced barriers to entry through availability of the internet, widening of markets to – increasing competition for customers, shifts power to buyers, and will result in a flood of new entrants with a lack of propriety. With the negative influences in mind, they can also help industry if positioned correctly, as mentioned above, by raising bargaining power by...
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