A review of the suitability of the characteristics and capabilities of an organization to make increased use of electronic communications should occur as part of developing Internet marketing plans. This is sometimes known as the ‘internal environment’ of the organization. The role of internal audits to assess the organization as part of situation analysis for strategy development is discussed further in Chapter 4 including the 7S framework which was developed by consultants at McKinsey at the start of the 1980s and which stands for Strategy, Structure, Systems, Style, Staff, Skills and Superordinate goals.
The operation of an organization’s marketplace comprises the interactions between all elements of the micro-environment. In this section we review the great range of changes that the Internet has brought to the marketplace. The issues we will review include:
- Competitive forces. How are the major external forces on an organization affected by the Internet?
- From value chain to value network. The value network concept describes a more dynamic version of the value chain with increased interaction between partners.
- New channel structures. What changes can occur to linkages to upstream and downstream partners in the supply chain? What is the role of new intermediaries?
- Location of trading. What are the options for location of trading online?
- Commercial arrangements for transactions. How are these changed?
- New business and revenue models. What business and revenue models can be adopted in the Internet marketplace?
Michael Porter’s classic 1980 model of the five main competitive forces that impact a company still provides a pertinent framework for reviewing threats arising in the e-business era. We will use it here to introduce the different competitive forces arising from the interplay between the different stakeholders of the micro-environment, each of which will be explored in more depth later in the chapter.
Table 2.2 summarizes the main impacts of the Internet on the five competitive forces affecting an organization. Note that, as seen later in this chapter and in Chapter 4, this form of analysis does not directly emphasize the importance of neutral intermediaries and strategic partnerships in affecting the visibility of an organization within the online marketplace.
Intermediaries such as search engines, price comparison sites and even blogs often have a strong influence on the balance between the bargaining power of buyers and suppliers and tend to intensify rivalry between existing competitors.