Page 311 - E-Bussiness and E-Commerce Management Strategy, Implementation, and Practice

M05_CHAF9601_04_SE_C05.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 11:12 Page 278

278 Part 2 Strategy and applications

competitors such as Zopa (www.zopa.com, which did not prove to be a viable business) or
traditional companies from a different geographic market that use the Internet to facilitate
their entry into an overseas market. Citibank (www.citibank.com), which successfully oper-
ates in the UK, has used this approach. ING, another existing financial services group,
formed in 1991 and based in the Netherlands, has also used the Internet to facilitate market
development. In May 2003, ING (www.ing.com) launched the online bank ING Direct in the
UK (www.ingdirect.co.uk). Since its launch in 1997 ING Direct has gained over 10 million
customers worldwide through its online banking operations in the USA, France, Italy, Ger-
many, Spain, Australia and Canada. More recently, the Icelandic bank Landsbanki
(www.landsbanki.is) is another example of a new entrant. These new entrants have been
able to succeed in a short time since they do not have the cost of developing and maintain-
ing a distribution network to sell their products and these products do not require a
manufacturing base. In other words, the barriers to entry are low. However, to succeed, new
entrants need to be market leaders in executing marketing and customer service. The costs
of achieving these will be high. These could perhaps be described as barriers to success rather
than barriers to entry. This competitive threat is less common in vertical business-to-
business markets involving manufacture and process industries such as the chemical or oil
industry since the investment barriers to entry are much higher.
2 Threat of new digital products
This threat can occur from established or new companies. The Internet is particularly good as
a means of providing information-based services at a lower cost. The greatest threats are
likely to occur where digital product fulfilment can occur over the Internet, as is the case with
delivering share prices, digital media content or software. This may not affect many business
sectors, but is vital in some, such as newspaper, magazine and book publishing, and music
and software distribution. In photography, Kodak has responded to a major threat of reduced
demand for traditional film by increasing its range of digital cameras to enhance this revenue
stream and by providing online services for customers to print and share digital photographs.
The extent of this threat can be gauged by a review of product in the context of Figure 5.10.

3 Threat of new business models
This threat can also occur from established or new companies. It is related to the competi-
tive threat in that it concerns new methods of service delivery. The threats from existing
competitors will continue, with the Internet perhaps increasing rivalry since price compari-
son is more readily possible and the rival e-businesses can innovate and undertake new

Buy-side threats Sell-side threats

Supplier Intermediary Organization Intermediary Customer
threats threats threats threats

New digital New New business
products entrants models

Competitive threats

Figure 5.10 Competitive threats acting on the e-business