E-commerce Analysis: Porter's Five Forces for Craft Business

This report provides an environmental scan of an e-commerce craft business, utilizing Porter's Five Forces Model to analyze the competitive landscape. The analysis assesses the threat of new entry, supplier power, buyer power, the threat of substitutes, and rivalry among existing competitors within the online craft supplies market. The report finds that the threat of new entry is low due to less strict government policies and lower capital requirements. Supplier power is high because of the limited number of unique suppliers. Buyer power is medium, and the threat of substitutes is low. The report concludes that moving the craft business online can lead to a sustainable business model. References from various academic sources support the findings, offering valuable insights for business owners and managers in the craft industry. The report aims to inform decision-making for small independent craft supplies stores moving online.

Running Head: MANAGEMENT
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E-commerce
Porter’s Five Forces Model
(Student details :)
5/29/2019

Environmental Scan
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Contents
Porter’s Five Forces Model for E-commerce Craft Business....................................................2
Porter’s 5 Forces Model.............................................................................................................2
Threat of new entry................................................................................................................2
Supplier of Power...................................................................................................................3
Buyer Power...........................................................................................................................3
Threat of Substitutes..............................................................................................................3
Rivalry among existing competitors......................................................................................3
Conclusion..................................................................................................................................4
References..................................................................................................................................4

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Porter’s Five Forces Model for E-commerce Craft Business
The report is containing a real-world analysis in order to help inform the decision-
making of a business owner and manager of small independent craft supplies store. This
analysis of the craft industry will be based on Porter’s 5 forces model particularly emphasized
on online viewpoints of craft supplies retailing (Dobbs, 2014).
Source: (Dobbs, 2014)
Porter’s 5 Forces Model
In this way, on the basis of this craft industry analysis, this paper will further assess
the main risks to craft business if it were to move online as follows:
The threat of new entry
When craft retailing business is going to enter into the online market then the threat of
new entry will be low. The threat is low because barriers to new market entry are less for a
craft business. In addition to that, capital requirements while switching from offline retailing
store to online store for a craft industrial firm are also less which makes the threat of new
entry low. Government policies are less strict and less complex for craft industries working
online or moving from offline to the online market. Besides, access to various distribution

Environmental Scan
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channels by the craft industry is also easier than those of others (Zott, Amit, & Massa, 2011).
Thus, it can be said that due to less switching costs threat of new entry for a craft industry is
relatively low.
Supplier of Power
In the context of the bargaining power of suppliers of Porter's 5 forces model, chosen
craft supplies industry will be facing high bargaining power of craft suppliers. Suppliers’
power is high because there are few selected suppliers in this industry who supplies good and
unique artifacts and hand-made as well as non-handmade products. Besides, the number and
size of suppliers are low in case of craft supplies stores which ultimately result in the high
bargaining power of suppliers for this chosen industry (Dobbs, 2014). Moreover, another
reason is that uniqueness of each craft suppliers’ product is high and hence each supplier is
having supremacy in their own area. Thus, due to the above main reasons the bargaining
power of suppliers is high in the selected case.
Buyer Power
In this case of craft supplies industry, bargaining power of buyers should be high
because of a number of customers is low for the craft industry. In addition to that, the size of
each customer’s order is also large which gives buyers’ more power of bargaining (Welsh,
2018). However, as per the given information craft business owner is having close
connections with the community clubs, local businesses as well as individuals thus high
bargaining power of buyers becomes medium for this particular case of the craft industry.
Apart from this, factors like the buyer’s capability to substitute and buyer’s info availability
also been considered when this paper has found the power of buyers medium in this case
(Zott, Amit, & Massa, 2011).
Threat of Substitutes
As we know that substitute product for the craft hobby kits, specialized stationary and
fabrics are rare hence threat of substitutes will be low for craft industry when I will move
from offline to the online platform (Jabareen, 2010). In other words, a number of alternative
products available in the market are very less which makes the threat of substitute products
low for craft industry working online. Apart from this, factors like relative cost performance
of substitutes as well as switching costs have helped to decide that the threat of substitutes
will be relatively low when the craft industry will move online (Osterwalder & Pigneur,
2010).

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Rivalry among existing competitors
From the perspective of rivalry amid existing competitors in the field of craft retailing
online, this force of Porter's model will be having medium value. In this context, as there is
an average number of online craft stores which sells art and craft products online hence
competition as compared to other online industries is low (Barnes & Hunt, 2013). Moreover,
craft stores are functioning offline rather over digital platforms these days; hence for Croydon
Craft Supplies rivalry among existing competitors will be medium. In addition to that, given
info is suggesting that Croydon Craft Supplies Store manager is having close connections
with those community clubs, local businesses as well as other individuals which ultimately
make the competition medium (Careersin Audit, 2013).
Conclusion
In whole, this report has successfully provided useful suggestions for a craft supplies
store which is currently working offline and hence looking forward to moving online e-
commerce business. Therefore, it has been found that when a retailer craft supplies store will
be moving online then it will help the owner for making their business model sustainable
from the future perspective.
References
Barnes, S., & Hunt, B. (2013). E-commerce and v-business (Eds. ed.). London: Routledge.
Careersin Audit. (2013, 07 15). The Importance of Risk Management In An Organisation.
Retrieved from CIA: https://www.careersinaudit.com/article/the-importance-of-risk-
management-in-an-organisation/
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Jabareen, Y. (2010). Sustainable urban forms: Their typologies, models, and concepts.
Journal of planning education and research, 26(1), 38-52.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for
visionaries, game changers, and challengers. London: John Wiley & Sons.

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Welsh, T. (2018, 12 20). E-Commerce Trends And Insights For Planning Your 2019 Digital
Marketing Strategy. Retrieved from Forbes:
https://www.forbes.com/sites/forbescommunicationscouncil/2018/12/20/e-commerce-
trends-and-insights-for-planning-your-2019-digital-marketing-strategy/
#75a346776ac9
Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future
research. Journal of management, 37(4), 1019-1042.