M5-Strategy-S3 -The internet's multiple forces
One underlying assumption in Porter’s five forces is that
- Customers are the ones who pay firms for the customer value offered by these firms.
- When an automaker sells a car, the buyer pays for it. The more power the customer has, the less a firm can expect for the customer value it offers.
The mediating and network externalities properties of the Internet, however, suggest that frequently the customer who gets value from a firm is not the one who pays for it.
This has significant implications for the competitive forces that impact an industry. Take the newspaper industry, which we said has two interdependent types of customers:
- its audience and
- advertisers.
A newspaper actually has two types of rivals:
- Those in the news business and
- those who sell and buy the kinds of things advertised in newspapers.
Thus, with the Internet, a newspaper’s rivals are not only other newspapers (or online news services), but also the auctioneers like eBay who advertise and sell many of the same items that are advertised in newspapers!
The threat of new entry also takes a different dimension since anyone with a website and the capability to offer any of the content that newspapers do (e.g., news, weather, advertising, sports scores, and stock prices) is a potential competitor for newspapers.
