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280 Part 2 Strategy and applications

such as Norwich Union or other insurers owned by the Royal Bank of Scotland
including Direct Line, Churchill, Privilege and Tesco Personal Finance.
In a counter-argument, Richard Mason, director of Moneysupermarket.com, said
that Direct Line’s campaign
smacks of complete desperation. We are the new kids on the block and Direct Line
don’t like it. They have lost their market share since we came on the scene – they
were in a position where consumers thought they were competitive and kept
renewing their policies. They spent hundreds of millions of pounds on advertising.
But now consumers can find cheaper alternatives and are doing so in their droves.
Data from Hitwise (2006) supports MoneySupermarket’s position. It suggests this site
achieves around a third of its visits from price sensitive searchers looking to compare
by typing generic phrases such as ‘car insurance’, ‘cheap car insurance’ and ‘compare
car insurance’. It has also invested in traditional advertising through TV, print and
outdoor media to increase brand awareness.

An additional downstream threat is the growth in number of intermediaries (another form
of partners) to link buyers and sellers. These include consumer portals such as Bizrate
(www.bizrate.com) and business-to-business exchanges such as EC21 (www.ec21.com).
This threat links to the rivalry between competitors. If a company’s competitors are repre-
sented on a portal while the company is absent or, worse still, they are in an exclusive
arrangement with a competitor, then this can potentially exclude a substantial proportion of
the market. For example, in the billion-dollar market involved in the verification of con-
sumer products and business shipments such as oil, chemicals and grain, Integrated Testing
Services (www.itsgroup.com) found that its main rival, the Swiss SGS Group (Société
Générale de Surveillance, www.sgsgroup.com) had signed an exclusive arrangement for
verification of cars on the Carbuster site. Despite its vintage, SGS has proved adaptable to
the new trading environment and has set up its own verification portal (SGS Online certifi-
cation, www.sgsonline.com) which offers a Gold Seal ‘kitemark’ that is indicative of ‘an
extremely good likelihood that sellers so rated would satisfy their buyers’ requirements on
pre-defined aspects of quality, quantity or delivery’. This is an example of countering new
intermediaries, sometimes referred to as a ‘countermediation strategy’. Through seizing
opportunities SGS pre-empted threats from existing competitors such as ITS and start-ups
such as UK-based Clicksure.

Buy-side threats

1. Power of suppliers
This can be considered as an opportunity rather than a threat. Companies can insist, for rea-
sons of reducing cost and increasing supply chain efficiency, that their suppliers use
electronic links such as EDI or Internet EDI to process orders. Additionally, the Internet
tends to reduce the power of suppliers since barriers to migrating to a different supplier are
reduced, particularly with the advent of business-to-business exchanges. However, if suppliers
insist on proprietary technology to link companies, then this creates ‘soft lock-in’ due to the
cost or complexity of changing supppliers.

2. Power of intermediaries
Threats from buy-side intermediaries such as business-to-business exchanges are arguably
less than those from sell-side intermediaries, but risks arising from using these services
should be considered. These include the cost of integration with such intermediaries, partic-
ularly if different standards of integration are required for each. They may pose a threat
from increasing commission once they are established.