Discuss, using examples, how the Internet may change Michael Porter's Essay

Discuss, using examples, how the Internet may change Michael Porter's five competitive forces - Essay Example The introduction of computers and internet has significant effects on Porter’s five forces model. According to Poon (1997), global computer network has far-reaching abilities and is capable of reducing the normal business expenditure. This paper analyses how Internet may change Michael Porter’s five competitive forces. How the Internet may change Michael Porter’s five competitive forces? Internet and Threat of substitute products Threat of substitute products is increasing day by day in global market after the arrival of internet and the subsequent development of ecommerce. As per the statistics released by US Department of Commerce in May 2005, e-commerce sales in the first quarter of the year had been $19.8 billion (Eschen, 2005). In other words, business in the virtual world is increasing rapidly at present because of the arrival of internet. It should be noted that Chinese companies are manufacturing plenty of duplicate products in their country. It is easy f or them to make a duplicate for iPhone 5 or Galaxy S4 and sell it at a cheaper rate. People in America or Europe can easily purchase these duplicate products with the help of internet. In short, threat of substitute products is increasing day by day because of the arrival of internet and subsequent development of ecommerce. ... As a result of that retailers forced to start business in the virtual world also. Wal-Mart and Tesco like prominent retailers have already started ecommerce because of the challenges facing by them from new entrants in the virtual world. Vitez (2013) pointed out that companies should implement current technologies in business. Otherwise competitors may use new Internet-based technology for creating a competitive advantage in the economic marketplace. For example, outsourcing is one of the latest business concepts developed in the corporate world with the arrival of internet. According to Thompson (2009), outsourcing is a business process in which a company contracts with another company to provide services that might normally performed by in-house employees. Because of manpower shortage, labor costs in America and Europe are extremely higher than that in Asian countries. Therefore, goods and services produced in these countries may struggle to compete effectively with Indian or Chine se products and services in the market. In order to avoid this problem, American and European companies are outsourcing their business to cheap labor oriented countries to compete effectively in the market. It should be noted that Indian or Chinese companies can sell cheaper products in American or European market through internet. As a result of that, American and European companies may struggle to sell their products even in the local market. â€Å"For existing businesses, these new online sellers represent a challenge to retain customers† (Hartman, 2013). To avoid this problem from new entrants, these companies are currently outsourcing and offshoring their business activities to cheap labor oriented overseas