Porter’s model and their 5 forces:

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every
industry, and helps determine an industry's weaknesses and strengths. Frequently used to identify
an industry's structure to determine corporate strategy, Porter's model can be applied to
any segmentof the economy to search for profitability and attractiveness.
1. Threat of new entrants. This force determines how easy (or not) it is to enter a particular industry. If
an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more
organizations compete for the same market share, profits start to fall. It is essential for existing
organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when:
 Low amount of capital is required to enter a market;
 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other
industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.
2. Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher priced or low
quality raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay
more for materials. Suppliers have strong bargaining power when:
 There are few suppliers but many buyers;
 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
 Cost of switching raw materials is especially high.
3. Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality
from industry producers when their bargaining power is strong. Lower price means lower revenues for
the producer, while higher quality products usually raise production costs. Both scenarios result in
lower profits for producers. Buyers exert strong bargaining power when:
 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.
4. Threat of substitutes. This force is especially threatening when buyers can easily find substitute
products with attractive prices or better quality and when buyers can switch from one product or
service to another with little cost. For example, to switch from coffee to tea doesn’t cost anything,
unlike switching from car to bicycle.
Rivalry among existing competitors. This force is the major determinant on how competitive and
profitable an industry is. In competitive industry, firms have to compete aggressively for a market share,
which results in low profits. Rivalry among competitors is intense when:
 There are many competitors;
 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.
Point Wise Difference between E-Commerce and traditional commerce
Basis for
Traditional Commerce E-Commerce
Comparison
Traditional commerce is a branch of business e-Commerce means carrying out
which focuses on the exchange of products and commercial transactions or
Meaning
services, and includes all those activities which exchange of information,
encourages exchange, in some way or the other. electronically on the internet.
Processing of
Manual Automatic
Transactions
Accessibility Limited Time 24×7×365
Goods can be inspected physically before Goods cannot be inspected
Physical inspection
purchase. physically before purchase.
Customer
Face-to-face Screen-to-face
interaction
Scope of business Limited to particular area. Worldwide reach
Information No uniform platform for exchange of Provides a uniform platform for
exchange information. information exchange.
Resource focus Supply side Demand side
Business
Linear End-to-end
Relationship
Marketing One way marketing One-to-one marketing
Payment Cash, cheque, credit card, etc. Credit card, fund transfer etc.

Need of E-commerce website

1. You Can Gain New Customers through Search Engines
There are many ways to make sure people can find your website. Whether you focus on long tail keywords
or Pay Per Click advertising on Google, it is essential that your website appears when searching for the
products or services you offer.
2. Sell Your Products Nation / World Wide
Customers do not have to visit your shop to buy your products, you can now send them direct to their door.
One major advantage of having an e-commerce website is that customers do not have to visit your shop to
buy your products, as they can be delivered anywhere in the country and direct to the customer’s door.
3. Customers Can Browse Your Products No Matter Where They Are
Potential customers can browse your entire product range whilst sitting on their sofa watching TV. You can
also up sell and cross sell by recommending products that relate to the ones they are browsing.
4. Your Social Media Following Is Growing But Potential Customers Have To Visit Your Business
To Buy From You
For your business to really benefit from a growing social media following you need to make it as easy as
possible for potential customers to buy your products. Continue to provide valuable content and then start
sending your followers to your website is the best way to turn followers into customers.
5. The Number Of People Visiting Your Shop Is Falling
Let’s be blunt, the footfall on high streets throughout the UK is dropping and I bet you can name a couple
of shops that have been boarded up on your local high street. With this in mind it is essential that you offer
your customers an easy way to buy your products and being able to buy your products anywhere at any
time is a great asset for any business.
6. You Want To Increase Sales
Increasing the number of opportunities to sell your products can massively contribute to the numbers of
sales you generate. But don’t think that just by building an ecommerce website you will automatically gain
new customers, there is still some leg work that has to go into making your website a success such as
driving traffic, provide informative content and engage visitors.
E-Commerce advantages can be broadly classified in three major categories:
1. Advantages to Organizations
2. Advantages to Consumers
3. Advantages to Society
Advantages to Organizations
1. Using E-Commerce, organization can expand their market to national and international markets with
minimum capital investment. An organization can easily locate more customers, best suppliers and
suitable business partners across the globe.
2. E-Commerce helps organization to reduce the cost to create process, distribute, retrieve and manage the
paper based information by digitizing the information.
3. E-commerce improves the brand image of the company.
4. E-commerce helps organization to provide better customer services.
5. E-Commerce helps to simplify the business processes and make them faster and efficient.
6. E-Commerce reduces paper work a lot.
7. E-Commerce increased the productivity of the organization. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request comes from a
customer and it uses just-in-time manufacturing way.
Advantages to Customers
1. 24x7 supports. Customer can do transactions for the product or enquiry about any product/services
provided by a company anytime, anywhere from any location. Here 24x7 refers to 24 hours of each
seven days of a week.
2. E-Commerce application provides user more options and quicker delivery of products.
3. E-Commerce application provides user more options to compare and select the cheaper and better
option.
4. A customer can put review comments about a product and can see what others are buying or see the
review comments of other customers before making a final buy.
5. E-Commerce provides option of virtual auctions.
6. Readily available information. A customer can see the relevant detailed information within seconds
rather than waiting for days or weeks.
7. E-Commerce increases competition among the organizations and as result organizations provides
substantial discounts to customers.
Advantages to Society
 Customers need not to travel to shop a product thus less traffic on road and low air pollution.
 E-Commerce helps reducing cost of products so less affluent people can also afford the products.
 E-Commerce has enabled access to services and products to rural areas as well which are otherwise
not available to them.
 E-Commerce helps government to deliver public services like health care, education, social services
at reduced cost and in improved way.
Disadvantage of e-commerce
The disadvantages of e-commerce can be broadly classified into two major categories −
 Technical disadvantages
 Non-Technical disadvantages
Technical Disadvantages
 There can be lack of system security, reliability or standards owing to poor implementation of e-
commerce.
 The software development industry is still evolving and keeps changing rapidly.
 In many countries, network bandwidth might cause an issue.
 Special types of web servers or other software might be required by the vendor, setting the e-
commerce environment apart from network servers.
 Sometimes, it becomes difficult to integrate an e-commerce software or website with existing
applications or databases.
 There could be software/hardware compatibility issues, as some e-commerce software may be
incompatible with some operating system or any other component.
Non-Technical Disadvantages
 Initial cost − The cost of creating/building an e-commerce application in-house may be very high.
There could be delays in launching an e-Commerce application due to mistakes, and lack of
experience.
 User resistance − Users may not trust the site being an unknown faceless seller. Such mistrust
makes it difficult to convince traditional users to switch from physical stores to online/virtual
stores.
 Security/ Privacy − It is difficult to ensure the security or privacy on online transactions.
 Lack of touch or feel of products during online shopping is a drawback.
 E-commerce applications are still evolving and changing rapidly.
  Internet access is still not cheaper and is inconvenient to use for many potential customers, for
example, those living in remote villages.
E-Commerce MODEL
Business - to - Business (B2B)
Website following B2B business model sells its product to an intermediate buyer who then sells the
product to the final customer. As an example, a wholesaler places an order from a company's website and
after receiving the consignment, sells the end product to final customer who comes to buy the product at
wholesaler's retail outlet.

Business - to - Consumer(B2C)
Website following B2C business model sells its product directly to a customer. A customer can view
products shown on the website of business organization. The customer can choose a product and order the
same. Website will send a notification to the business organization via email and organization will dispatch
the product/goods to the customer.

Consumer - to - Consumer (C2C)

Website following C2C business model helps consumer to sell their assets like residential property, cars,
motorcycles etc. or rent a room by publishing their information on the website. Website may or may not
charge the consumer for its services. Another consumer may opt to buy the product of the first customer by
viewing the post/advertisement on the website.

Consumer - to - Business (C2B)

In this model, a consumer approaches website showing multiple business organizations for a particular
service. Consumer places an estimate of amount he/she wants to spend for a particular service. For
example, comparison of interest rates of personal loan/ car loan provided by various banks via website.
Business organization who fulfills the consumer's requirement within specified budget approaches the
customer and provides its services.

Business - to - Government (B2G)

B2G model is a variant of B2B model. Such websites are used by government to trade and exchange
information with various business organizations. Such websites are accredited by the government and
provide a medium to businesses to submit application forms to the government.

Government - to - Business (G2B)

Government uses B2G model website to approach business organizations. Such websites support auctions,
tenders and application submission functionalities.

Government - to - Citizen (G2C)

Government uses G2C model website to approach citizen in general. Such websites support auctions of
vehicles, machinery or any other material. Such website also provides services like registration for birth,
marriage or death certificates. Main objectives of G2C website are to reduce average time for fulfilling
people requests for various government services.