B301 Making Sense of Strategy: Digital Impact on Porter's Forces

This essay explores the impact of internet and digital technologies on Porter's Five Competitive Forces, including competitive rivalry, the threat of new substitutes, the bargaining power of buyers and suppliers, and the entry of new competitors. It highlights how these technologies are reshaping business models and creating new opportunities and challenges for organizations. The essay also discusses market entry threats to new small businesses in Kuwait, such as economies of scale, differentiated products, high capital costs, and switching costs. It emphasizes the importance of strategic planning and the effective use of emerging technologies for businesses to overcome these barriers and succeed in the Kuwait market. This student-contributed document is available on Desklib, a platform offering a range of study tools and resources for students.

Making Sense 1
MAKING SENSE OF STRATEGY
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Making Sense 2
Making Sense of Strategy
In the current competitive global market, organizations need to understand the impact of
the internet and digital technologies on Porter’s competitive forces to be able to succeed. The
first step to business success is analyzing the external environment to understand the
opportunities and threats in the respective markets and the impact of emerging technologies on
the five competitive forces. Strategic planning helps organizations, especially small-scale
entrepreneurs, to overcome threats of entry into new markets. Several factors such as economies
of scale, differentiated products, and cost of switching are threats of entry to new entrants in
Kuwait, and local organizations rely on strategic planning to overcome them.
Internet and Digital Technologies and the Five Competitive Forces
Competitive rivalry is one of the competitive forces and the internet and digital
technologies are fueling the rivalry as the entry as exit barriers go down. The technologies help
organizations to develop comparatively low-cost digital business models (Michael, 2008).
Currently, new entrants can start operating in a country such as Kuwait without renting or
owning physical assets. Besides, new entrants are able to leverage internet marketing and reach
out a wide audience without necessarily spending much capital. As such, this competitive force
opens the ways for small businesses who understand the market to share the market with existing
competitors, which eventually increases rivalry.
The next force is the threat of new substitutes, which the technologies affect by
introducing digital substitutes or hybrid substitutes. Before the emergence of the digital tools,
taxi services in Kuwait, for example, had offices where clients would find them. Currently, some
of the services such as Uber serve their customers through a digital application so it uses a hybrid
model. Since switching costs are low, the threat of substitutes is higher during the current

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technological era than before (Grant, 2013; Michael, 2008). In the case of taxi services,
customers have the power to change from the traditional model to the new one by installing the
appropriate application. The new system offers greater convenience than the older one, making
the propensity to switch high.
The internet and digital technologies also affect the bargaining power of buyers as they
help to meet the needs and expectations of consumers. Digital customers have a new set of
expectations, and the technologies bring about continual corporate innovation across operations
and products, which play an important role in amassing a significant amount of bargaining power
(Kamran, 2013; Campbell, et al., 2011). The power is increased due to the current instant access
to information on digital channels such as social media. From these sites, consumers access the
benefits and costs of different products. Other essential pieces of information that they get from
these sources are the availability of substitutes and usage of products. Therefore, the
technologies empower buyers to know what they need and be able to demand to be served
appropriately.
Additionally, the internet and digital technologies have a significant impact on the
bargaining power of suppliers, which is another critical competitive force. Suppliers are pleased
to adopt the technology if it contributes positively to their businesses (Omsa, 2017; Bruner &
O’Connor, 2017). As such, some of them who have not known the benefits of the technology are
trying to slow down the adoption of digitally based business models. Ride-sharing and room-
sharing are some of the most common legal and business issues that embrace the observance of
established rules. In these areas, suppliers work hard to ensure all business process and
innovations accord to the traditional regulatory practices. This new development is essential for
ensuring the emerging technologies do not promote the creating of dishonest business practices.

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The bargaining power of suppliers in this category is essential for ensuring honesty is a
constant factor in all business operations. According to Michael, Barbara, & Samuel (1998),
more organizations, given the need for businesses to form new partnerships and ensure the
current ones are efficient, will keep turning to digital technologies to help accelerate their
business models. The internet and digital technologies are, therefore, playing a central role in
increasing the bargaining power of suppliers as they have information on the best strategies they
need to use to remain in business.
The entry of new competitors is another competitive force, and the internet and digital
technologies are influencing the force as is changing the nature of competition. Due to the
emergence of these technologies, modern businesses do not need to worry about the traditional
competitors (Villani, 2013; Mathews, 2013). New entrants from outside the industry are
becoming a major concern for all industries. For example, software manufacturers are also
offering digital ways to transfer money. Banks, for that matter, have software manufactures as
new competitors in the market. These new competitors are well equipped with efficient value
proportions and digital business models as these new entrants are often giants in the technology
industry who have envisioned and created the business model. The business models are more
attractive as new platform ecosystems power them. Besides, given the organizations
understanding of ways to leverage technology, they use the cloud, mobile and social media
technologies to market their products and reach a wide range of customers (Michael, et al, 1998).
In addition, they use cybersecurity, artificial intelligence, and the Internet of Things to improve
their platform’s value proposition.

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Market Entry Threats to New Entrants in Kuwait
There are several threats of entry to new small businesses in Kuwait, and one of them is
the economies of scale. Several companies in the country manufacture and sell at a large scale.
As a result of this, they enjoy cost advantages (Tan, 2011). The fact that cost per units is low
when operating on a large scale cannot be diminished completely by the contribution of
technology. The more local companies in Kuwait produce, the more the benefit they register.
Since many existing companies in the country have this advantage, new entrants in small-scale
entrepreneurship have some difficulty to enter the market as they have to match the scale to
benefit from similar cost advantages (Khouja, 2014). While this may not be completely possible
at the initial stage, the new entrants can rely on the internet and digital technologies as this
ensure they can survive on a limited budget after developing the required relations with
stakeholders.
Differentiated products can also be a barrier to entry into the Kuwait market. Many
businesses in the country know the essence of strategic planning and are using a variety of
strategies, including differentiation of products, to succeed in the local market. As such, these
companies have to develop a strong brand identity in the country, and so new entrants force an
uphill task getting established in Kuwait (Hitt, 2017). However, these small businesses can invest
heavily in creating products with new and unique benefits to successfully enter the local market
saturated market. Besides, the new entrants need to focus on improving customer experience. In
this way, they can break the current brand loyalties and attract and retain many of the customers.
The other common barrier to new entrants in Kuwait is high capital costs. Industries that
require high capital costs at the initial stage prevent small companies from investing in them. The
huge capital requirement, therefore, acts are a barrier to entry (Hitt, 2017). Effective use of

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emerging technologies such as the internet and building a strong brand identity from the onset is
essential for breaking the barrier. Alternatively, the organizations can buy a franchise license and
benefits from the reputation of an already established brand in the country. In this, way, they can
break the high capital cost barrier as they develop strategic business relations in Kuwait.
High cost of switching is another market entry barrier in the country. When businesses
want to move from one location to another, they first consider the cost associated with the move.
If the cost is high, that might serve as a barrier (Hitt, 2017; Dess, 2012). The Kuwait government
has enacted laws that protect local strategic and infant industries. As such, the switching cost for
operating in those industries is high. Businesses wanting to invest in the country should find
ways of removing the costs. Some strategies are making local experts leaders of the organization
and creating employment for many youths.
Conclusion
The internet and digital technologies have changed the way people do business. The
technologies have changed the concept of competition and created a level playing ground for all
players. As such, technology is disruptive to traditional business models, and business executives
must devise better ways to deal with the new challenges. Technology, however, is an essential
tool for overcoming market entry barriers. Small businesses that want to enter the Kuwait market
need to use effective use of strategic planning to beat the competition.

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References
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Grant, R. M. (2013) Contemporary strategy analysis. Chichester: John Wiley.
Hitt, M. A. (2017) Strategic management, competitiveness & globalization: concepts and cases.
New York: Cengage Learning.
Kamran, Q. (2013) Complexity the sixth competitive force that shapes strategy: a cybernetics
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Khouja, M. W. (2014) Economy of Kuwait: development and role in international finance.
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Tan, F. B. (2011) International enterprises and global information technologies: advancing
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Villani, G. (2013) Valuation of R&D investment opportunities with the threat of competitors
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