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Threat of New Entrants in the Market

Discuss about the Impact Of Digital Technologies And Internet On The Five Competitive Forces .

Threat of new entrants refers to the probability of entrance of new competitors in the market. The more will be the probability of entry of new players, the less will be the profitability for the business organizations. Prior to the initiation of the updated technologies and internet, business organizations had less probability of entry of new competitors (Fitzgerald et al. 2014). This is due to the reason that in the traditional business model, huge capital investment was required for entry in a particular market. However, with the emergence of the technologies and internet, it became easier for the new entrants to initiate and develop disruptive technologies (DaSilva et al. 2013). This is also enabling them to enter the market with less capital investment and compete with the established players.

In addition, emergence of the updated technologies and internet reduced the traditional rules and regulations required to enter in any business sector. Prior to the development of digital technologies and internet, it was difficult for the new and small business organizations to gather information regarding the particular business sector. However, initiation of the digital technologies and internet is helping the new entrants to gain diverse information about the business sector to enter. Thus, the entry in the business is more safe and secure for new business organizations with the help of internet and digital technologies. However, it should also be noted that initiation of the internet and digital technologies is having impact for the established and existing business organizations (Eid and EI-Gohary 2013). This is due to the reason that new entrants are finding more opportunities to make entry in the market and it is increasing the competition for the existing business organizations.

Threat of substitutes refers to the availability of the alternative products in the market. The more will be the availability of the substitute products, the more will be the intensity of competition in the market. Emergence of internet and digital technologies further increased the threat of substitutes in the market. This is due to the reason that in the current time, online offerings are posing huge competition for the offline offerings. Emergence of the internet and digital technologies is giving birth to the number of online players (Porter and Heppelmann 2014). These online players are gaining more popularity in the recent time due to the reason that customers are gaining more conveniences from the online products and services.

Threat of Substitutes in the Market

There are various instances being emerged in the recent time where it is seen that online services are being initiated that offers same product or service as the offline and traditional organizations. For instance, emergence of the app based cab services is changing the existing market scenario in the cab aggregator industry. Online cab services are gaining popularity over the traditional cab services due to the reason that online cab services are providing more facilities to their customers along with increased conveniences (Zhang et al. 2013). This is causing increase in competition for the traditional cab operators.

However, on the other hand, initiation of the internet and digital technologies is also helping the existing business organizations to reduce the threat of substitutes by offering more added services. This is due to the fact that with the help of the internet and digital technologies, existing business organizations are offering more added services by attaching complementary online services along with their physical and offline products. More diverse services are being offered with the physical products in order to create distinctive image in the market and to cut off the threat of substitute. Thus, it can be concluded that emergence of internet and digital technologies is increasing the threat of substitutes for the businesses along with providing more options to cut off the threat of substitutes.

Emergence of the internet and digital technologies is also increasing the barging power of the buyers. This is due to the reason that internet facilities are providing more options for the buyer to gain knowledge and information about certain product or service. Internet facilities gave birth to the social media, which helps the buyers to compare and discuss regarding any offerings (Macaulay 2018). Generation of word of mouth influence the buyers to have preference for certain offerings. Moreover, due to the initiation of the internet and digital technologies, switching cost for the buyers also got reduced, which further enhances the bargaining power of the buyers. Reviews from the existing customers determine the future business revenue and with the initiation of the digital technologies, buyers are having more mediums such mobile devices to check the reviews. Thus, the bargaining power of the buyer gets increased and it is important for the businesses to effectively determine the need and want of the buyers.

Contrary to the bargaining power of the buyers, emergence of the internet and digital technologies helps the businesses in reducing the bargaining power of the suppliers. This is due to the reason that internet helps the business organizations in gaining more information about the available suppliers in the market. Moreover, different technologies such as supplier relationship management help the business organizations to maintain effective relationship with the suppliers. This enables the organizations to prevent any issues in relation to the suppliers. Emergence of internet and digital technologies is enabling the business organizations to have more options of choosing suppliers without having any geographical difficulties and thus they are having the upper hand in managing the suppliers.

Bargaining Power of the Buyers

Emergence of internet and digital technologies is increasing the competitive rivalry due to the reason that internet and technologies are providing more options for the business to operate in the market. For instance, emergence of internet and digital technologies helped in initiating social media marketing for the organizations. Moreover, it also helps the business organizations to have more market reach and area for their operation. With the change and development in technology, organizations are initiating newer mediums to market their offerings, which is further enhancing the competitive rivalry.

In the recent time, Kuwait is coming up as one of the major economies in the Middle Eastern region. Business friendly initiatives by the government are further contributing in developing the economy with the entry of more numbers of small and large organizations. However, there are some issues being identified regarding the entry of the new entrants in the market of Kuwait.

In the recent time, Kuwait is developing their economy but still they are in the nascent stage of development and are having limited market potentiality. Moreover, the population of Kuwait is also not huge, which will have limited potentiality for the business organizations. On the other hand, large business organizations will have the ability to compete in the global market, but the small entrepreneurship will be limited in the domestic market. Thus, small market size in Kuwait will pose challenge to the entrepreneurship ventures in attaining economies of scale.

According to the global competitiveness report, Kuwait in having the ranking of 49 in terms market size. Thus, they are quite small in terms of market size and it will be a challenge for the small businesses to operate.

Kuwait is having stringent and inefficient government policies for doing business. Thus, it is difficult for the new entrants especially for the small business organizations to cope up with the complexities. This is due to the fact that large business organizations can deal with the government issues with the help of their position and power. However, it will get difficult for the small business organizations to adhere to the inefficiencies of the government and it will create barrier for them to enter in the market of Kuwait.

According to the Global Competitive index, the most problematic factor in doing business in Kuwait is inefficiency of the government. Thus, it will be difficult for the small business organizations to enter in the market of Kuwait.

Another major barrier that will be faced by the new entrants will be the requirement of capital. Huge capital investment is required to enter in to a particular market. However, small business organizations are having less access to the finance and thus it will be difficult for them to make entry in the market.

According to the global competitive index, Kuwait is having the ranking of 55 in terms of availability of latest technologies. Thus, it is difficult for the organizations to have the access to the latest technologies. Large organizations can have their technology sourced from foreign countries but for the small business organizations, it will be difficult to source the updated technologies and thus they may not compete effectively with the competitors in the market. If the small business organizations cannot get the access to the latest technology, then they will be not being able to gain competitive advantages in the market.

DaSilva, C.M., Trkman, P., Desouza, K. and Lindi?, J., 2013. Disruptive technologies: a business model perspective on cloud computing. Technology Analysis & Strategic Management, 25(10), pp.1161-1173.

Eid, R. and El-Gohary, H., 2013. The impact of E-marketing use on small business enterprises' marketing success. The Service Industries Journal, 33(1), pp.31-50.

Fitzgerald, M., Kruschwitz, N., Bonnet, D. and Welch, M., 2014. Embracing digital technology: A new strategic imperative. MIT sloan  management review, 55(2), p.1.

Macaulay, S., 2018. Non-contractual relations in business: A preliminary study. In The Law and Society Canon (pp. 155-167). Routledge.

Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.

Www3.weforum.org. (2018). Www3.weforum.org. [online] Available at: https://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf [Accessed 24 Apr. 2018].

Zhang, D., He, T., Liu, Y. and Stankovic, J.A., 2013, October. CallCab: A unified recommendation system for carpooling and regular taxicab services. In Big Data, 2013 IEEE International Conference on (pp. 439-447). IEEE.

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