Business Level Strategies Analysis: Impact of Digital Technologies

This report critically analyzes the impact of internet and digital technologies on business level strategies, specifically focusing on Porter's Five Forces framework within the context of the Kuwaiti business environment. The analysis explores how digital advancements influence industry rivalry, the bargaining power of suppliers and buyers, the threat of new entrants, and the threat of substitutes. Furthermore, the report investigates the challenges faced by small-scale entrepreneurs in Kuwait, identifying threats such as government regulations, switching costs, financial constraints, and economies of scale. It suggests strategies for overcoming these obstacles, emphasizing the importance of building relationships and securing adequate financing to establish successful businesses in the market. The report draws on various academic sources to support its findings and provides a comprehensive overview of the dynamic interplay between digital technologies and business strategies in Kuwait.

Running head: BUSINESS LEVEL STRATEGIES
Business Level Strategies
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Critical analysis of the impact of internet and digital technologies on each of the Five
Competitive Forces
External business environment analysis is a vital strategy of the organizations that help
them to identify and understand the potential opportunities and threats and take actions
accordingly. One of many important and effective tools for external environment analysis is the
Porter’s Five Forces Framework. This tool is beneficial for competition analysis, which
addresses the factors, such as, industry rivalry, bargaining power of suppliers, bargaining power
of buyers, threat of new entrants and threat of substitutes (Rothaermel 2015).
Industry rivalry refers to the competition from the existing rivals. This is a major factor
that determines the organizational performance as well as competitiveness. A good
understanding of the industry rivalry helps in adopting the most suitable marketing strategy.
Competition may come from innovation, promotional activities, non-price competition, degree of
transparency etc. (Grant 2016). Bargaining power of suppliers originates from the input market.
All kinds of supplies can give the suppliers bargaining power with the firm that can have an
influence on the business operation. The bargaining power of buyers originates from the output
market and the behavior of the customers can shape the organizational performance through the
demands and purchasing behavior. Threat of new entrants comes from new competitors in the
market. When an industry becomes profitable, it attracts new entrants along with some other
impacts. Lastly, threat of substitutes originates from substitute products or services and ease of
switching (E. Dobbs 2014).

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Figure 1: Porter's Five Forces Framework
(Source: E. Dobbs 2014)
According to Benmamoun et al. (2016), the internet and digital technology sector of
Kuwait has become increasingly significant for the economy in the last few years. The mobile
and internet infrastructure and the services have presented the great potential for the
organizations. However, as the competition is increasing not only in the domestic market, but
also in the international market due to increased FDI and global business policies, the external
environment analysis required to find out the impact of the digital technologies on the five
competitive forces. The impact of internet and digital technologies of Kuwait on the each of the
five competitive forces are as follows.

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Threat of new entrants
The digital business has changed the nature of the competition. Here the threats of new
entrants not only come from the physical stores, but also from the digital platforms. The biggest
example of this type of competition is the emergence and popularity of the e-commerce websites,
such as, Amazon, Ebay and Souq. There are digital business models and platforms for new
technology, that are available to every business in the industry and there can be arrival of new
business entities in the digital world at any point of time due to reduced barriers to entry (Evans
2015). Digital businesses require less capital and can yield large economies of scale at a shorter
time. There is also enhanced cyber security resulting in increased value proposition of the
business. The nature of business is far more transitory and dynamic due to the enhanced internet
and digital technology, which makes the competition intense (Pagani and Pardo 2017).
Threat of substitutes
In the digital business, the threat of substitutes comes from either purely digital substitute
products or from a hybrid digital or physical substitute. The example of hybrid digital business
model is that of the taxi services, Uber, Abi Taxi and Q8 Taxi in Kuwait who provide a mobile
app to the customers to book the physical service (kuwaitlocal.com 2018). The incidence is
similar in case of home delivery services in Kuwait where people choose the app for
convenience. The switching cost is less in case of digital business substitutes, for example, it
takes smartphones and mobile internet and only a few second to download and install the app
and start using the service.

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Bargaining power of suppliers
Suppliers have a great bargaining power in the internet and digital business. They can
either speed up or slow down the integration of the digital business model depending on its
impact on their own business. If the suppliers follow traditional business model, they would not
accept the digital business easily and would enforce their bargaining power for not using the new
technology. In case of ride-sharing or room sharing businesses, which is supported by the new
technology using businesses are promoted for convenience for both the supplier and the buyers,
however, the traditional businesses do not support this type of business idea and hence, may not
provide adequate support for the business establishment (Rothaermel 2015).
Bargaining power of buyers
The consumers have immense bargaining power in the modern world due to instant
access to the information through the internet, access to the social media, reviews, feedbacks,
access to substitute products or services and price sensitivity (Evans 2015). It is the biggest force
of competition as the digital businesses have emerged from the needs, demands and expectations
of the customers. The level of convenience and quality of products and services are influenced
by the bargaining power of the consumers.
Industry rivalry
All types of businesses face the challenge of industry rivalry as there are many existing
firms in that industry. In case of internet and digital technology industry of Kuwait, there are
multiple companies that are close rivals of each other. Some of the major telecom companies of
Kuwait are Qualitynet, Orbit Showtime Network (OSN), KIPCO, Mobile Telecommunications
Co (MTC) / Zain, Ooredoo Kuwait, Kuwait Telecom Company (KTC) / Viva, FASTtelco, and

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CITRA (Palejwala 2013). In the age of digital businesses, the intensity and degree of rivalry has
increased considerably. The barriers to entry and exit have decreased due to low cost business
models. Many times, the entrants do not have to own any physical asset, infrastructure or large
capital and hence, they can give hard competition by spending on the quality of products and
services and enhancing the customer experience (Palacios-Marqués, Soto-Acosta and Merigó
2015).
Internet and digital technologies have changed the course of business. These have
widened the horizon of business from local to global. The five competitive forces are greatly
influenced by the internet and digital technologies that have changed the way of business in
Kuwait in the last few years.
Four threats of entry to new entrants in small scale entrepreneurship in Kuwait and ways
to overcome them
The major four threats of entry that the new entrants in the small scale entrepreneurship
in Kuwait faces are the government regulations, switching cost, financial constraints, and
economies of scale (Koch 2011).
Like the other Middle East countries, Kuwait’s economy is also heavily dependent on the
oil production and export. Although the economy has developed significantly, yet the
predominance of oil still exists. Kuwait is an expensive place for doing business. There is
requirement to have a Kuwaiti agent for the business entities. The oil and gas production and
exploration sector has a closed nature, and their aversion to risk have resulted in slow growth of
the business sector, especially for the small scale entrepreneurship (Alhajeri 2012).

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The small scale entrepreneurs face a lot of government regulations, that make their entry
into an established market difficult. Being small in size, these businesses often face challenges to
meet the business requirements set up by the government. Switching cost for the customers is
high while changing the preference to established companies to new companies. The people in
Kuwait mostly prefer to trust and do business with known firms, rather than with new firms. The
most common problem for the small scale businesses is the lack of adequate capital (Burns
2016). The small businesses often cannot enter the market due to lack of capital and necessary
infrastructure. Lastly, economies of scale is a major threat to entry to the small scale businesses.
The sectors are already established and being small scale entrepreneurs, they cannot afford to
produce on a large scale and enjoy the benefits of economies of scale.
To overcome the above mentioned constraints, firstly, the small scale businesses should
focus on getting adequate capital through loans from the banks and other financial institutions.
The complex business environment of Kuwait requires patience, persistence and flexibility and
hence, to face the government relations, personal relations and careful planning are important in
Kuwait (Kenny and Dyson 2016). The small scale businesses should focus on the market entry
strategies that would minimize the switching cost of the consumers and should also focus on
delivering the best quality of product and services at a lower cost. Once they capture the market
share by building a close relationship with the customers, they should focus on expanding and
enjoying economies of scale.
Thus, it can be said that, Kuwait being one of the most developed countries in the Middle
East still has predominance over the oil industry for economic growth. The small businesses face
the challenges of inadequate capital, government regulations, switching cost for the consumers
and economies of scale that creates threats of entry into a new market. The small scale

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entrepreneurships in Kuwait must handle these challenges through building relationships and
getting adequate finances to establish the businesses successfully in the market.

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References
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