If there is something that keeps the CXOs of companies awake at night, it is the disruptive and dynamic business environment. With market value of companies being closely monitored by the world, staying competitive is the biggest challenge. Based on Porter’s Five Forces Framework, here are the factors that affect the profitability and sustainability of the companies.
Threat of new entrants
With digital age, this threat has become bigger, with any new company creating a world class website to poach customers from the existing players in the market. The existing players could have spent years building the trust and the confidence of their customers, but the loyalty of customers today is really driven by the search ranking of your brand on google!!
With increasing number of startups that are extremely focussed on specific offerings, competition is at its peak. Internet based companies without an office are competing against well established brick and mortar companies. Global giants are entering markets that were once left at the disposal of the local companies.
Bargaining power of suppliers
Keeping cost price low is the only way to keep your services relevant to your customers and expand your customer base. But if the costs of your employees and prominent suppliers keep exceeding with time, your margins are at stake. No wonder companies are exploring outsourcing, offshoring and now automation through artificial intelligence to reduce cost overheads and thus stay relevant in today’s markets.
Bargaining power of customers
Customers can today bargain better than ever before through internet. Aggregator websites put you right against your competitors and if you are not able to differentiate yourself, customers will continue to have a upper hand. Many digital aggregators like uber and airbnb are giving control in the hands of customers and disrupting age old business models built by traditional companies.
Threat of substitute products
The digital economy is building alternate products that are taking away manual jobs of agents, distributors, advisors etc by empowering customers to avail paperless services delivered at their door steps. This is just the beginning and everyone is watching out for the next job to get replaced by machines.
Rivalry among existing players
The internet has removed the regional barriers, and have introduced the notion of ‘one company to rule them all’. The rise of internet giants like google, facebook and amazon have further reinforced this notion. With no consolation prizes, rivalry among competitors is at its peak.