porters referred to this force as the micro environment, to contrast it with the more general term macro environment..a change in any forces normally requires a business unit to re access the marketplace given the overall change in industry information...
supplier power - it is high when buyers have few choices of whom to buy from. it is low when buyers choices are many. best practices of IT to create competitive advantage. for example like B2B(business to business) marketplace -private exchange allow a singe buyer to post it needs and then open the bidding to any supplier who would care to bid. REVERSE AUCTION is an auction format in which increasingly lower bids.
threat of substitute products and services - it is high when there are many alternatives to a product or services. meanwhile it isl ow when there are few alternatives from which to choose. ideally, an organization would like to be on a market in which there are few substitutes of their product or services. best practice of IT for example electronic product that is in same function but different brands. to the extent that customers can use different products to fulfill the same need, the threat of substitutes exist.
switching cost- costs can make customer reluctant to switch to another product or services.
threat of new entrants- it is high when it's easy for new competitors to enter a market. it's low when there are significant entry barriers to entering a market. entry barriers is a product or service feature that customer have come to expect from organization and must be offered by entering organization to compete and survive. best practices of IT for example new bank must offers online paying bills, account monitoring to compete.
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