John Cabot University
Industry Background 2
PEST Analysis 4
Michael Porter’s Five Forces Analysis 7
Threat of New Entrants 7
The Power of Suppliers 8
The Power of Buyers 8
Threat of Substitutes 9
The objective of this paper is to analyze e-commerce industry in Italy and to determine its attractiveness by applying PEST analysis and Michael Porter’s Five-Force Analysis. E-commerce is defined as the sale of products and services through computer networks. As the world changes and technology ...view middle of the document...
In the 2013 Global Retail E-commerce Index, Italy ranked 15th. Italy scored only 16.1% in the online market size and 64.3%in the category of potential growth. In addition, from 2001 to 2014 the numbers of users who accessed the Internet increased by 30%, whereas the numbers of those who connected daily increased four-fold, from 7.1% in 2001 to 36.9% of 2014. Although Italian online buyers are early adopters, they are already active users since 25% of the Italians interviewed by PricewaterhouseCoopers use the digital channel at least once a week. The main reasons Italians shop online include the ability to find items at lower prices, the opportunity to choose from a greater variety of products, and the availability of special offers while sitting in front of their computer.
An important analysis made by Michael Porter discusses the concept of the value chain and the way in which organizations are able to create value for their customers. As more value is created, more profit is likely to be generated, and consequently, an organization is able to develop a greater competitive advantage. For example, the diffusion of B2B marketplace allows physically distant organizations to meet and to share specific organizational aspects, thereby improving their visibility.
Another benefit of digital technology is that it allows the organization to efficiently redesign the internal management. For instance, the software Enterprise Resource Planning (ERP), a business process management software, allows companies to organize the internal process of production more efficiently, reduce waste, and improve the flexibility of the production. For instance, lean production is an assembly-line methodology whose aim is to redesign the overall strategy in order to take advantage of new software management techniques.
A part from the administrative benefits, there are financial advantages to consider when deciding to undertake a digital commerce. Electronic commerce allows the disintermediation of sellers and distributors, permitting the organization to reduce the final costs of its products. Also, e-commerce allows firms to establish a relationship with consumers, hence increasing the visibility of the brand and simplifying the gathering of consumer feedback. For some Italian firms, e-commerce is not just a sales channel, but also a new space where companies can rethink approaches to marketing and business communications. For example, Yoox.com is a successful Italian e-commerce website specializing in the sale of fashion apparel. It has gained success in Europe, the Unites States, and China, and in 2013 it registered more than 1.1 million active users.
Through the PEST analysis it is possible to understand the market potential growth or decline of an industry, as well as to evaluate the factors that currently affect or might affect the industry in the future.
It is necessary to analyze the impact of political developments since these...