What is porter’s five forces model all about? This model was presented by Michael E. porter, which majorly focuses on the five force’s identification as well as analysis that serve as the basis to shape each and every industry. All these forces combine to give you the power to determine the strengths as well as the weaknesses of the concerned industry.
Following is the list of porter’s five forces:
1. Competition in the concerned industry
2. The threat of new entrants
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
Implementation of Porter’s five forces model on eBay
When we talk about the vast global e-commerce marketplace, one of the most important players that come to our mind is the eBay. EBay possess a really very strong position in e-commerce marketplace. Here is the implementation of the porter’s five forces model on eBay.
A quick view on porter’s five forces model implementation on eBay
1. New entrants potential into the concerned industry –Medium
2. Power of suppliers – Low to medium
3. Power of buyers – High
4. Substitute product’s threat – Low
5. Competition in the industry / competitive rivalry – Medium to high
Competitive Rivalry
The first force of the porter’s five forces model deals with the potential competitors of the concerned industry that can serve as a threat to your company.As a matter of fact, eBay faces really tough and extreme competition in payments businesses as well as in its marketplace. Being a well-reputed as well as astrong player, eBay faces a sort of severe competition from online players of the e-commerce marketplace as well as from the offline ones. Why is the competition really severe? Being so much wide, e-commerce marketplace proffers you lots of benefits to buy the products.
What are the factors that influence the customer’s decision of purchase? Price, the sort of services as well as product selection is few important factors that influence the customer’s decision. Especially when we talk about the prices, it becomes difficult for the players of this marketplace to raise it for the reason that there is really tough completion as the players tend to introduce the discount offers etc on frequent basis. When we consider the newcomers in the e-commerce industry, for instance, Apple Play, Alibabaetc, we get to know that the competitive rivalry for Ebay is really high.
The Threat of New Entrants
The second force of the porter’s five forces model considers the threat of new entrants in the concerned industry. For instance, it majorly focuses on the potential barriers to entering the industry, as a newcomer. The lower the barriers, the weaker the company’s position in its concerned industry.
As a matter of fact, for eBay, there are no barriers for the newcomers to enter into this marketplace and start selling products. It’s really very easy for them to do so. But at the same time, gaining the brand reorganization like eBay is somewhat difficult for the newcomers in this industry. Also, it is really difficult for the newcomers to get the high ranking like eBay on the search engines like Google. So, it becomes difficult for the new players of the industry to win the customer’s trust as eBay has managed to do so already. So, keeping all these things in mind, the threat of the new entrants for eBay is not so high but it’s medium.
Customer’s Bargaining Power
This force of the porter analysis deals with the bargaining power of the customers i.e. how the customers can affect the prices. As a matter of fact, the customers of eBay hold the power for the reason that there are a number of options available to them to buy the products from. As mentioned above, the e-commerce marketplace is full of lots of choices for the customers to buy the products from. Keeping this in mind, we can easily conclude that the buyers hold the power. For this reason, the companies need to constantly check their prices in comparison to all other available options to attract the buyers. Due to the presence of lots of online as well as offline players, the customers have always the option to buy from any other source that is proffering them the same quality products at low prices. So, eBay needs to constantly look at the prices as well as the quality to fulfill the customer’s demand as well as to stand out from the crowd for the buyers, keeping in mind that the customer’s bargaining power is really high.
Bargaining Power of Suppliers
This force of porter analysis deals with the bargaining power of suppliers i.e. how they can affect the prices. The bargaining power of the suppliers for the eBay isn’t so high but is low to medium. How? The reason is that there are more than million sellers who list their items in eBay marketplace, as they find it reliable for them. But as a matter of fact, if we look through the other perspective, the suppliers have a number of other options available too. So, if in case eBay introduces unsatisfactory policies as well as prices for them, they can easily switch to the other available alternatives, such as Amazon, Etsy.com etc.
The Substitute Products
The last but not the least force of the model deals with the threat of substitutes i.e. what are the potential alternatives available to the company’s products or services. If you have the experience of buying products from eBay, you have been noticing that eBay makes you available a wide array of products to buy to its customers so that they could buy all the products from a single spot that they need. So, for this porter’s force, there is not threat for eBay. As a matter of fact, the eBay keep introducing the new product range according to the lasted trends to satisfy the customer’s need.
References
Afuah, A. and Tucci, C.L., 2001. Internet business models and strategies (p. 358). New York: McGraw-Hill.
Hax, A.C. and Wilde, D.L., 2002. The Delta Model–Toward a Unified Framework of Strategy.