At the first glance, most people think that the Internet brings more benefits than negative effect to the industry strusture.In the article, the author holds a different attitude toward this proposition. He states that most of trends the Internet has brought about is negative. It's during my undergraduate study that I learned Porter's five force model for the first time. So I am not unfamiliar with the idea. This model helps us to anaylze the current situation of industry.
As for the first factor "the intensity of rivalry among existing competitors" in the model, the Internet is an open system, enabling competitors access to offerings the company is providing. Thus, it eliminates proprietary offerings and intensifies the rivalry among competitors. The use of the Internet also tends to expand the geographic market, bringing many more companies into competition with one another. In the end, competition focuses on price mainly.
The second factor in the model is barrier to entry. I think that appearance of the Internet reduces barrier to entry sharply because the Internet technology makes access to channels and physical assets easier. Moreover, the Internet creates a new sales force. As for the threat of substitute products or service, the Internet makes the overall industry more efficient by expanding the size of the market. At the same time, it also mitigats the difference between offerings.
No matter for bargaining power of buyers or suppliers, the Internet still has more negative effects on them. The Internet shifts bargaining power to the end consumers and reduces switching costs of consumers. The Internet provides a channel for suppliers to reach end users, reducing the leverage of intervening companies. Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurement to standardized products that reduce differentiation. Reduced barriers to entry and the proliferation of competitors downstream shifts power to suppliers.
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