Impact of Digital Technologies and Internet on Competitive Forces

This article discusses the impact of digital technologies and internet on the five competitive forces, including the threat of new entrants, threat of substitutes, bargaining power of buyers and suppliers, and competitive rivalry. It also explores the challenges faced by new entrants in Kuwait, including limited market approach, government policy, capital requirements, and technological readiness.

Running head: BUSINESS STRATEGIES
Business strategies
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Impact of digital technologies and internet on the five competitive forces
Threat of new entrants
Threat of new entrants refers to the probability of entrance of new competitors in the
market. The more will be the probability of entry of new players, the less will be the profitability
for the business organizations. Prior to the initiation of the updated technologies and internet,
business organizations had less probability of entry of new competitors (Fitzgerald et al. 2014).
This is due to the reason that in the traditional business model, huge capital investment was
required for entry in a particular market. However, with the emergence of the technologies and
internet, it became easier for the new entrants to initiate and develop disruptive technologies
(DaSilva et al. 2013). This is also enabling them to enter the market with less capital investment
and compete with the established players.
In addition, emergence of the updated technologies and internet reduced the traditional
rules and regulations required to enter in any business sector. Prior to the development of digital
technologies and internet, it was difficult for the new and small business organizations to gather
information regarding the particular business sector. However, initiation of the digital
technologies and internet is helping the new entrants to gain diverse information about the
business sector to enter. Thus, the entry in the business is more safe and secure for new business
organizations with the help of internet and digital technologies. However, it should also be noted
that initiation of the internet and digital technologies is having impact for the established and
existing business organizations (Eid and EI-Gohary 2013). This is due to the reason that new
entrants are finding more opportunities to make entry in the market and it is increasing the
competition for the existing business organizations.

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Threat of substitutes
Threat of substitutes refers to the availability of the alternative products in the market.
The more will be the availability of the substitute products, the more will be the intensity of
competition in the market. Emergence of internet and digital technologies further increased the
threat of substitutes in the market. This is due to the reason that in the current time, online
offerings are posing huge competition for the offline offerings. Emergence of the internet and
digital technologies is giving birth to the number of online players (Porter and Heppelmann
2014). These online players are gaining more popularity in the recent time due to the reason that
customers are gaining more conveniences from the online products and services.
There are various instances being emerged in the recent time where it is seen that online
services are being initiated that offers same product or service as the offline and traditional
organizations. For instance, emergence of the app based cab services is changing the existing
market scenario in the cab aggregator industry. Online cab services are gaining popularity over
the traditional cab services due to the reason that online cab services are providing more facilities
to their customers along with increased conveniences (Zhang et al. 2013). This is causing
increase in competition for the traditional cab operators.
However, on the other hand, initiation of the internet and digital technologies is also
helping the existing business organizations to reduce the threat of substitutes by offering more
added services. This is due to the fact that with the help of the internet and digital technologies,
existing business organizations are offering more added services by attaching complementary
online services along with their physical and offline products. More diverse services are being
offered with the physical products in order to create distinctive image in the market and to cut off

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the threat of substitute. Thus, it can be concluded that emergence of internet and digital
technologies is increasing the threat of substitutes for the businesses along with providing more
options to cut off the threat of substitutes.
Bargaining power of the buyers
Emergence of the internet and digital technologies is also increasing the barging power of
the buyers. This is due to the reason that internet facilities are providing more options for the
buyer to gain knowledge and information about certain product or service. Internet facilities gave
birth to the social media, which helps the buyers to compare and discuss regarding any offerings
(Macaulay 2018). Generation of word of mouth influence the buyers to have preference for
certain offerings. Moreover, due to the initiation of the internet and digital technologies,
switching cost for the buyers also got reduced, which further enhances the bargaining power of
the buyers. Reviews from the existing customers determine the future business revenue and with
the initiation of the digital technologies, buyers are having more mediums such mobile devices to
check the reviews. Thus, the bargaining power of the buyer gets increased and it is important for
the businesses to effectively determine the need and want of the buyers.
Bargaining power of the suppliers
Contrary to the bargaining power of the buyers, emergence of the internet and digital
technologies helps the businesses in reducing the bargaining power of the suppliers. This is due
to the reason that internet helps the business organizations in gaining more information about the
available suppliers in the market. Moreover, different technologies such as supplier relationship
management help the business organizations to maintain effective relationship with the suppliers.
This enables the organizations to prevent any issues in relation to the suppliers. Emergence of

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internet and digital technologies is enabling the business organizations to have more options of
choosing suppliers without having any geographical difficulties and thus they are having the
upper hand in managing the suppliers.
Competitive rivalry
Emergence of internet and digital technologies is increasing the competitive rivalry due
to the reason that internet and technologies are providing more options for the business to
operate in the market. For instance, emergence of internet and digital technologies helped in
initiating social media marketing for the organizations. Moreover, it also helps the business
organizations to have more market reach and area for their operation. With the change and
development in technology, organizations are initiating newer mediums to market their offerings,
which is further enhancing the competitive rivalry.
Threats of entry for new entrants in Kuwait
In the recent time, Kuwait is coming up as one of the major economies in the Middle
Eastern region. Business friendly initiatives by the government are further contributing in
developing the economy with the entry of more numbers of small and large organizations.
However, there are some issues being identified regarding the entry of the new entrants in the
market of Kuwait.
Limited market approach
In the recent time, Kuwait is developing their economy but still they are in the nascent
stage of development and are having limited market potentiality. Moreover, the population of
Kuwait is also not huge, which will have limited potentiality for the business organizations. On

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the other hand, large business organizations will have the ability to compete in the global market,
but the small entrepreneurship will be limited in the domestic market. Thus, small market size in
Kuwait will pose challenge to the entrepreneurship ventures in attaining economies of scale.
Figure: 1
Market size of Kuwait
Source: (Www3.weforum.org 2018)
According to the global competitiveness report, Kuwait in having the ranking of 49 in
terms market size. Thus, they are quite small in terms of market size and it will be a challenge
for the small businesses to operate.
Government policy
Kuwait is having stringent and inefficient government policies for doing business. Thus,
it is difficult for the new entrants especially for the small business organizations to cope up with
the complexities. This is due to the fact that large business organizations can deal with the
government issues with the help of their position and power. However, it will get difficult for the
small business organizations to adhere to the inefficiencies of the government and it will create
barrier for them to enter in the market of Kuwait.

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Figure: 2
Problematic areas in doing business in Kuwait
Source: (Www3.weforum.org 2018)
According to the Global Competitive index, the most problematic factor in doing
business in Kuwait is inefficiency of the government. Thus, it will be difficult for the small
business organizations to enter in the market of Kuwait.
Capital requirements
Another major barrier that will be faced by the new entrants will be the requirement of
capital. Huge capital investment is required to enter in to a particular market. However, small
business organizations are having less access to the finance and thus it will be difficult for them
to make entry in the market.

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Technological readiness
According to the global competitive index, Kuwait is having the ranking of 55 in terms of
availability of latest technologies. Thus, it is difficult for the organizations to have the access to
the latest technologies. Large organizations can have their technology sourced from foreign
countries but for the small business organizations, it will be difficult to source the updated
technologies and thus they may not compete effectively with the competitors in the market. If the
small business organizations cannot get the access to the latest technology, then they will be not
being able to gain competitive advantages in the market.

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Reference
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