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Evaluation of Business Model


The business model of Internet Securities is analysed through the Porter・s Five Forces Model.  This model provides a useful means of analysing the internal and external business environment. 

The analysis

The analysis of the business information industry using the Five Forces Model.

1.   Threat of new entrants

The threat of new entrants is high.  The market for online information is large and growing on its life cycle.  The technological changes and the commercialisation of the Internet fuelled the growth of both the supply and demand of information.  Many small competitors are able to enter the market easily as the start-up costs are reduced significantly.  This also attracts small and large acquisitions and partnerships. 

Internet Securities has posed several barriers to entry.  First of all, it provides product differences with hard-to-find financial, business and political information solely for emerging markets that primarily available on the World Wide Web.  Secondly, its mission .local intelligence, global advantages・ has achieved the economies of scale to build a strong database for its product/service.  This also allows the company for absolute cost advantage through learning curve.  Finally, the company often negotiates with contracts contained exclusivity clauses preventing the information providers from selling the same information to other competitors.  

2.   Bargaining power of customers

The bargaining power of customers is high.  There are plenty of information providers in the market from high-end information companies charged over $1,000 per month to smaller niche players priced their products around $250 per month.  Hence, customers have choices of different price ranges in different services in terms of accuracy, reliability, and whether the information is up-to-the-minute or not.  Switching cost is minimal so customers can change their information providers easily. 

Internet Securities has expanded the product/service package with a distinct marketing mix (Figure 1), which the customers buy.  Therefore, any move to a rival will result in lower value from the new product/service.

Marketing mix

Details

Product

The product is differentiated with hard-to-find financial, business and political real-time information to business professionals solely from emerging markets. 

Price

Internet Securities offers a fixed rate low-price structure.  The standard subscription price is $250 per country per user per month, with a sliding scale to encourage volume purchases.

Place

The information is primarily available on the Internet・s World Wide Web and customers can access to the information anytime and anywhere.

Promotion

Some information is offered on the Internet for free to help introduce potential customers to service.  Other promotion includes direct sales, telesales and direct mail. 

Figure 1: Internet Securities・ Marketing Mix

3.   Bargaining power of suppliers

The bargaining power of suppliers is high.  It is because the information that the providers supply can impact on differentiation.  The competitors in the market are therefore willing to offer more to the information providers for differentiated input.  Furthermore, the threat of forward integration relative to threat of backward integration is higher in the industry.

Internet Securities has tried to change the relative bargaining positions in the market.  The company often tries to negotiate contracts contained exclusivity clauses preventing the information providers from selling the same information to the others competitors.  It also offers more for unique information that customers really want, real time information and hard-to-find information.  Finally, it plays an active role to solve the technical problems to improve the information flow, for example by partnering with Polish banker to form Internet Technologies, reliable phone lines were obtained for excellent proprietary network services.

4.   Threat of substitute products/services

The threat of substitute products/services is low.  The substitution is the traditional newspapers, magazines, and periodicals, etc.  This traditional form of information cannot offer the same benefits that the information providers can offer on the World Wide Web such as wide variety, real time information, etc.

However, no one knows what the next phase of technological breakthrough is.  Internet Securities should continue monitor its macro- and micro-environments for possible opportunities for new product development and threats for new substitution.

5.   The industry: jockeying for position among rivals

The intensity of rivalry is high.  Except the large dominance, there are many small competitors, for example there are estimated over 3,000 online financial information companies in the United States alone.  Acquisitions and partnerships are common for such high growth industry.  The competition is therefore intensified.

Internet Securities has improved its value chain for greater efficiency and effectiveness in facing with the competition challenge.  Value chain can improve cost structure and quality of products, but it is difficult for the competitors to duplicate for its interdependent activities from different functions. 

The implications

The analysis above shows that Internet Securities adopts a cost focus strategy (from Porter・s generic strategies) to keep out its competitors.  The company seeks to satisfy a narrow target (information about emerging markets) at a lower cost as its competitive advantage.


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