The Use of IT by Yahoo, in Dealing with Porters Competitive Forces - Essay Example

? The use of IT by yahoo, in dealing with Porter’s competitive forces School: Introduction Yahoo is an American-based, internationally operating Internet Company. The company’s headquarters is based at Sunnyvale in California (Yahoo, 2013). The company’s business areas include its search engine platform, Yahoo mail, Yahoo groups, Yahoo news, Yahoo answers and Yahoo finance, online mapping, advertising, social media, fantasy sports, and video sharing (Yahoo, 2013). The company is among the most popular in the US as well as at other countries, and serving its customers over more than 30 languages. There are five areas in the Porter’s five forces model, which are used to explain the competitive climate of a company. These different forces include the power of customers, the threat of new entrants into the industry, the power of supplier agents, competitive rivalry and the threat of substitute products (Gamble & Thompson, 2011). This paper will explore the competitive environment of Yahoo, in a structured and clear manner, towards exposing the ways that the company uses IT to counter competitive forces and to cultivate their advantage. The threat of new entrants The threat of entry does not affect the competitiveness of Yahoo, due to the following facts. Considering the fact that a new entrant would need to invest millions of dollars, towards developing a site to compare to Yahoo, yahoo have used the popularity of their internet platform as a mechanism of keeping new entrants out of the industry (Gamble & Thompson, 2011). Further, the Yahoo Company has taken advantage of the fact that it takes many years to build a company that will attract millions of internet users; the company has worked hard to sustain its customer-base and to recruit more over the internet platform, which makes it difficult for new entrants. The company has used IT to create economies of scale, including that, like their main competitors, including Google and Altavista; it has setup numerous servers across the world, which helps it collect information on user habits. The wide network allows the company to offer innovative, unified and customized products, in a better and faster manner, which blocks the entry of new industry players. Brand loyalty is among the premises used by the company to eliminate the threat of new entrants, including that in the area of email communication, the company is the second best service provider, with more than 273.1 million users. Through the wide IT outreach, the company has eliminated the threats of new entrants, by ensuring that the costs of developing a new web-portal and recruiting the customers of Yahoo would time and resource consuming (Gamble & Thompson, 2011). The power of customers The bargaining power of the customers of the Yahoo Company is high, which is evident from a number of facts. These factors include the availability of substitute search engines in the market. In countering this threat to the business of the company, Yahoo has introduced highly interactive customer services that create an experience to keep their customers with their company (Gamble & Thompson, 2011). One example of these innovative services offered over the IT platform, with the aim of keeping its customers include that the company offers chat-services over its mail platform, it offers highly non-alterable security for e-mail users and also offers news alerts to its customers (Yahoo, 2013). Therefore, unlike other industry players, the company can keep its customer and attract more, by improving the outlook of their services, towards increase the confidence of their customers in the company (Yahoo, 2013). The threat of Substitutes The threat of substitute products is intensive for the company, because it is not the leader in the industry (Gamble & Thompson, 2011). For example, in the search engine service delivery, Google is the strongest competitor, and the dominant player in the search engine industry. Towards countering the high treat of substitute products, the Yahoo Company has expanded its service areas to areas that are not covered by other industry players (CSF, 2013). These innovative services include social networking services, college recruiting, social event calendar, user-enabled control of media players, photo sharing, online advertising and chat-services (Yahoo, 2013). Using these innovative service areas, the company has increased its competitive advantage against the major competitors in the industry, including Google. In responding further, to the threat of substitute products from the main competitors, including Google, the company has worked on strategies of reducing the time spent by customers at its sites, trying new products among other areas. In realizing this, the company ensures that it tests its products to ensure that it is “highly robust than the ordinary internet software beta”, before releasing them into the market (CSF, 2013). The company has resolved towards this strategy, based on the realization that public testing highly expensive. Further, the company views that after releasing a faulty product into the market, many potential customers will not try the product again, due to the negative experience with it (Yahoo, 2013). Additionally, the company works hard to develop its IT-related products, to ensure that upon release, it will be very difficult for competitors to copy them. These strategies and delivery checks delay the product deployment duration (CSF, 2013). Comparative Market share of Yahoo among other major industry players Source: (Yahoo, 2013) In response to the increasing popularity of social networking sites was a major threat to Yahoo, therefore the company introduced its interactive service platforms, which will help it capture a portion of the followers of social networking services (Yahoo, 2013). To further promote its standing, over the internet platform, the company has diversified into more IT-related areas, including online news services, which keep the users of their services updated on global and other news (Schonfeld, 2012). Another area is communication, where the company is offering highly interactive platforms of individual and group communication, including the SoundPrint platform, which allows users to review TV content and to share with friends, over many platforms including Twitter and Face book (Schonfeld, 2012). Another IT-related area used by the company to promote its standing within the industry is that of offering web-based software, which are used to ensure that the experiences of the users of their services is very fulfilling (Schonfeld, 2012). Competitive rivalry within the industry The industry has a high intensity, in the area of the competitive rivalry between the players within the industry. Towards countering the adverse effects of competition – which is also a strategy aimed at increasing market dominance – the company and yahoo went into a partnership, which would promote the industry standing of both companies (Lakely, 2008). For example, according to the Yahoo Company, paid advertisements by Google would appear on the search pages of Yahoo. In estimation of the future benefit from the partnership, the Yahoo Company mentioned that it expected to generate USD 800 million from the advertisements, during the first year of partnership. The partnership demonstrates a clear case, involving the use of IT and the internet platform to promote the competitive advantage of the company, irrespective of the fact that the partnership is beneficial to both companies (Lakely, 2008). The partnership demonstrates the use of the internet platform as the marketing area for the two companies, and in the particular case, the deal demonstrates the potential of the group-forces of the two companies, where the two companies intend to attract more customers to their platforms, through using the mutual exchange to promote the market standing of both companies. Therefore, like the Yahoo company views, partnering with the leader in the industry will allow it to benefit from the interactive deal, to increase its market positioning, while at the same time improving its revenues (Lakely, 2008). Conclusion Yahoo is an American company offering different services, including search engines, news platforms and interactive communication among others. The main competitors of the company include Google and Bing, which control a considerable portion of the industry. Through a review of the company’s strategy, based on Porter’s five forces mode, the company’s threat to new entrants is low, because a new entrant would have to invest a lot of money and time, before competing with the company. In the area of the power of customers, the company has invested in innovative IT related products and services, towards limiting the exit of customer to their competitors. Under the threat of substitutes, the company has developed IT-related products that are not offered by their competitor, including their interactive communication platform and their news services. Under competitive rivalry, the company has entered into strategic partnerships with the main competitor, Google over the internet, which improves the company’s profile. References CSF. (2013). Google Inc Vs Yahoo Inc - Strategies: Summary of Case Studies. Corporate Strategy Forum. Retrieved from http://corporatestrategy-forum.blogspot.com/2006/05/google-inc-vs-yahoo-inc- strategies.html Gamble, J. E., & Thompson, A. A. (2011). Essentials of Strategic Management, Second Edition. New York: McGraw-Hill Irwin. Lakely, J. (2008). Yahoo-Google Deal Draws Fire from Regulators, Competitors. Heartland. Retrieved from http://news.heartland.org/newspaper-article/2008/11/01/yahoo-google-deal-draws- fire-regulators-competitors Schonfeld, E. (2012). Scott Thompson: Yahoo’s Competitive Advantage Is Its Data. Techcrunch.com Retrieved from http://techcrunch.com/2012/01/04/thompson-yahoo-competitive-advantage-data/ Yahoo. (2013). Yahoo Platforms. Yahoo.com Retrieved from http://www.yahoo.com/ Read More