Role of Technology in Relation to Porters 5 Forces - a Role of E-Business in Creation of New Economy - Article Example

STRATEGIC MANAGEENT ARTICLE ANALYSIS Student name Instructor name Institution Date Role of technology in relation to porters 5 forces (technology in attaining competitive advantage) Introduction Porters five forces of competitive advantage include; threat of substitute services of products, suppliers bargaining power, buyers bargaining power(channels, end users) and lastly existing rivalry among the existing competitors. Threat of substitute services and products arise from the internet expanding the market size. Internet makes the industry more efficient be eliminating to entry and exit to market. Market size expansion creates treats of substitution to the industry. The buyers are provided with wide variety of services and products. This threatens the real services and products in the industry. Sometimes the new services and products are of low quality and the customers cannot easily differentiate them. Substitution threats emanates from the idea of internet proliferation. This section will discuss the five forces of porter’s sources of competitive advantage. There will a critical approach to the forces in relation to internet application. Competitive advantage is borne by effective internet application. Subsequent revolution in the applications of internet will yield in value creation in the industry. Effective barriers to entry include economies of scale and high product/service differentiation. This makes it hard for new entrants as the cost is too high for both sellers and buyers (Porters, 2003). Internet gives sellers bargaining powers. Sellers can have competitive advantage in relation to the procurement of services and/or products. Suppliers use internet to get additional suppliers and increase their bargaining power. This is attributed to wide access of information about market. Internet links suppliers with end users of their services and/or products. The direct link is useful in minimizing leverage of intervening companies. Sellers operations through the internet reduce unnecessary market malpractices. Sellers do procurement through the internet. There is also equal access to the digital market. Equal access to market will result to sellers offering standardized services and/or products to the buyers. This will reduce compromise of quality in the name of making abnormal profits. Digital systems are avenues for ethics in doing business. The sellers will have a competitive advantage but there will be no undue advantage in the market. There is minimal differentiation of products by the sellers. This is due to digital procurement practices. There are no effective barriers to entry in the market. Downstream proliferation of market/industry competitors will cause a shift of power to suppliers (Porters, 2003). The third force in the model refers to competitors engaging in market rivalry. Internet reduces competitor differences in relation to market approach. When competitors offer attractive offers to clients, they do not manage to keep them. Price competition results to the use of internet. This gives competitive advantage in terms of market penetration. Competitive advantage is there when the sellers/competitors offer considerate prices to the clients in addition to right quantity of goods and /or services. Internet leads to globalization of market. There is a wide access to geographical and global markets. The number of competitors increases with the geographical market. This is attributed to globalization. Sellers aim to set prices just enough to cover marginal costs. With the advancement in technology, relative variable costs will be lowered. Sellers will be pressurized to offer price discounts as the variable cost in relation to fixed costs has been lowered (Porters, 2003). The forth force refers to the buyers bargaining power. Internet applications offer options of window shopping and access to wide variety of products and/or services. Internet shifts bargaining power to buyers. Traditional channels are now overwhelmed by internet options. The perception of powerful channels is now over with the advent of internet in the market. Internet is advantageous to the sellers as prospects of customer loyalty are relatively high. This means that internet reduces the switching costs. Availability of market information through the internet makes it possible for buyers to switch to other service and/or product suppliers in the industry (Porter, 2002). The fifth force refers to barriers to entry. The notable barriers to entry include sales force, physical assets and access to channels. The internet eliminates the necessity of sales force (marketing), physical assets and access channels. The physical assets are substituted with virtual assets. Internet proficient is a sufficient access to market channels. Digital systems are avenues for ethics in doing business. The sellers will have a competitive advantage but there will be no undue advantage in the market. There is minimal differentiation of products by the sellers Internet eliminates barriers to entry to some/or all markets. Internet allows entry of new market players and exit of existing market players. This promotes healthy competition among industry players. This will eliminate dead weight losses imminent in some markets. There is current flood of new industry entrants due to internet applications. Competition adds value to the industry. There only strategy to survive in the industry is through value creation. There is correlation between internet and market competition. Competitive advantage is borne by effective internet application. Subsequent revolution in the applications of internet will yield in value creation in the industry. Effective barriers to entry include economies of scale and high product/service differentiation. This makes it hard for new entrants as the cost is too high for them (Porters, 2003). Relationship between internet and structure of industry Some of the industry advantages include digital market places, online actions. The cost of acquiring information, market and industry communication and transaction costs is effectively lowered. The essence of internet is to alter the process front end. This is through creation of automated fulfillment centers. . Value creation in the industry will result due to healthy competition in the market. Internet has led to emergence of new industry structures to reflect new global advancements. These have been brought about by rapid technological developments. Internet developments have brought about classifications such as business-business, business-consumer and this is purely on the basis of profitability. Besides competitive advantage, internet creates economic value for services and/or products in the industry. There is new basis of classifying industry players with rapid pace of industry. Internet projects increase in industry profitability. Competitive advantage is there when the sellers/competitors offer considerate prices to the clients in addition to right quantity of goods and /or services. Internet leads to globalization of market. There is a wide access to geographical and global markets. The number of competitors increases with the geographical market. This is attributed to globalization. Sellers aim to set prices just enough to cover marginal costs (Porters, 2003). Internet places different impacts on different industry players. Some trends are negative while others are positive. This depends on economic value it places on industry, seller or buyer who is in the market. The good thing is internet provides wide range of information to industry players so that there are no market malpractices. For instance internet intensifies industry rivalries among competitors. Increased competition among sellers will lead to reduction in prices and/or offer of high quantity of services and products. The only negative trend with intensified competition is provision of substandard products to the buyers. Globalization will bring more companies into direct competition. This will reduce the cost of doing business. The companies will strive to offer products with the least cost possible. Value creation in the industry will result due to healthy competition in the market. Internet has led to emergence of new industry structures to reflect new global advancements. These have been brought about by rapid technological developments. Internet developments have brought about classifications such as business-business, business-consumer and this is purely on the basis of profitability (Porters, 2003). Conclusion The five forces of competitive advantage include; threat of substitute services of products, suppliers bargaining power, buyers bargaining power(channels, end users) and lastly existing rivalry among the existing competitors. Competition will increase new industry entrants due to internet applications. Competition adds value to the industry. There only strategy to survive in the industry is through value creation. There is correlation between internet and market competition. The increased application of internet will be effective in yielding competitive advantage. There will prospects of value creation in the market and industry competition in terms of technological developments. Availability of market information through the internet makes it possible for buyers to switch to other service and/or product suppliers in the industry. Internet allows entry of new market players and exit of existing market players. This promotes healthy competition among industry players. The number of competitors increases with the geographical market. This is attributed to globalization. Digital systems are avenues for ethics in doing business. The sellers will have a competitive advantage but there will be no undue advantage in the market. There is minimal differentiation of products by the sellers. Critique of porter’s article Introduction Porter’s article is clear, logical, orderly and clear representation of impact of internet on different sectors of the economy. The article has been organized in sections. Some of the parts of the article include the porter’s model, strategy and internet, internet and the structure of the industry, the future of internet and competitive advantage and the new economy. In the article, porters has clearly demonstrated how internet affects different sources of competitive forces in the industry, there is a clear and logical presentation of positive and negative trend on each force in the industry. There is also clear distinction on impact of internet on business strategy. This has been illustrated in terms of value creation, value chain and economic impacts in various markets. Discussion The literature review is sufficient in the article. The article illustrates how entrepreneurs, business observers, industry fast movers, investors and business executives are affected by the internet application. The common point is that internet determines business strategy for various industry players. Companies shift basis of industry competition depending on the impact of internet in their sector of concern. For instance, the article has discussed how competition shifts prices, quality of service and/or products, and this makes it hard for industry players to make abnormal profits. The article is detailed on how useful partnerships and outsourcing relationships end up misguiding industry. The article clearly explains how e-business has played a role in creation of new economy. Internet creates an enabling technology which will assist to capture economic benefits in the new economic creations. The habit of discounting internet applications will not aid in salvaging companies from stiff competitions. The article has succeeded in presenting the specifications, goals, and adequate literature review and article analysis in relation to business strategy. This has be dome through discussion relating to different sectors of the economy, impact of internet on different sectors of economy and strategic position for businesses. The article has used a diagram to show link and interrelationship between various forces which from source of competitive advantage in the industry. The diagram uses arrows and positive and negative signs to depict positive and negative trends in the industry. This is related to actins of various players and influence from internet applications. For instance, there is a clear illustration on how bargaining power of buyers and sellers is affected by internet applications. Conclusion The article clearly explains how e-business has played a role in creation of new economy. Internet creates an enabling technology which will assist to capture economic benefits in the new economic creations. The article has discussed how competition shifts prices, quality of service and/or products, and this makes it hard for industry players to make abnormal profits. There is a clear illustration on how bargaining power of buyers and sellers is affected by internet applications. There is a clear and logical presentation of ideas, presentation through well drawn diagrams and effective linking of business ideas in relation to different internet generations. In conclusion, article has succeeded in presenting the specifications, goals, and adequate literature review and article analysis in relation to business strategy. Effects of the internet in the Australian Retail banking sector Introduction Internet banking is a new development in the banking sector. Dynamics in the banking sector include customer personal banking, mobile banking and ability to withdraw or deposits fees from different locations around the world. Electronic banking systems such as electronic fund transfers systems have made it possible for real time banking. This section will discuss dynamics in the banking sector especially in relation to retail banking, selection of business level strategies, the underlying assumptions in the selection of strategies, management of competition, and formation of community banking and the presence of online banking in the banking sector. We shall conduct a connection of porter’s model in banking before and after 1990. 1990 marks the year of initiation of internet banking. Dynamics in the banking sector include banks, for instance upsurge in the number of online accounts as compared to internet banks. This is due to application of e-strategy. Online payment system involves banking from any location and this has reduced cost of banking ((Jansen, 2006). Assumption Some banks assume that internet would undermine its business strategy. This is due to the accessibility of information and globalization of business ideas. To begin with, is the assumption of ‘right goal’. Economic value will be created through sustainable profitability. The second assumption is that strategy ought to deliver set of benefits or value proposition which is not similar with what the competitors are offering. Distinctive value chain is the third assumption. Companies’ activities ought to be different from other rival competitors’ activities. This is through configuration of service delivery, logistics, marketing, human resource management and others (Henry, 2011). The forth assumption involve trade off which relate to robust strategies. Tradeoffs make a company to be distinctive. The fifth assumption relates to synergy of activities. The activities need to fit together and this is through making of choices through interdependent value chain. The last assumption is that direction needs to be continuous and this will define strategy. Continuity of direction will assist company to develop unique skills and build strong reputations with their customers (Gale, 2005). Social media has played a role in the creation of community banks. Full online banking has been made possible through frequent referrals. The social sites necessitate online community banking and this is trough application of technology. The social media provides effective forum of marketing and incumbent banks are active subscribers of social sites. There is a regular updates of incumbent banking activities so as to keep pace of banking competition (Barfield, 2003). Conclusion Dynamics in the banking sector include banks, for instance upsurge in the number of online accounts as compared to internet banks. The internet has affected Australian banks through dynamics such as e-banking and online accounts among customers. The social media provides effective forum of marketing and incumbent banks are active subscribers of social sites. Continuity of direction will assist company to develop unique skills and build strong reputations with their customers. Direction needs to be continuous and this will define strategy. The banking activities need to fit together and this is through making of choices through interdependent value chain. 1990 marks the year of initiation of internet banking. Some banks assume that internet would undermine its business strategy. 1990 marks the year of initiation of internet banking. Companies’ activities ought to be different from other rival competitors’ activities. 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