There is a single pool of suppliers for social media sites. This is also effected by the cost of switching, whether there are available substitutes and the cost of the substitutes. When there are a large number, the business has more power to resist price hikes. With a lower number of suppliers, there is a greater ability to raise prices. The bargaining power of suppliers indicates whether a business’s supplier has the ability to raise prices which would lower profitability. Competition is determined by the percentage of market share the four biggest firms in the industry own. When this occurs, often there are price wars and the need for expensive advertising platforms which affect the businesses profit margin.
Competition is great when there aren’t many businesses existing that are selling the same products or services, when the type of business is growing, and when customers can move to a competitor’s product for little money without much effort. Competitive rivalryĬompetitive rivalry looks at how strong the competition is based on the amount of competitors and the abilities of each. These factors include, “threat of new entrants, threat of substitution, bargaining power of buyers, bargaining power of suppliers and rivalry amongst existing competition.” Porter’s model has some support in terms of simplicity, predictive and explanatory power, and generalizability (Miller & Dess, 1993). Porter’s Five Forces Model (1980), examines five specific elements that contribute to the profitability of a business based on other businesses in the same industry.
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