Cross-border e-commerce Porter’s five forces model analysis: in-depth analysis of the industry competitive environment

Introduction to Porter’s Five Forces Model

Porter’s Five Forces Model, proposed by Michael Porter of Harvard Business School in the early 1980s, is a model used for competitive strategy analysis. This model can effectively help analyze the customer’s competitive environment and is suitable for scientifically and systematically understanding the overall industry situation in the cross-border e-commerce marketing process. Porter’s five forces model includes the following five aspects:

• Bargaining power of suppliers
• Bargaining power of buyers
• The ability of potential competitors to enter
• Substitutability of substitutes
• The current competitiveness of competitors in the industry

Analysis content of Porter’s five forces model

Analyzing suppliers

Cross-border e-commerce sellers need to pay attention to the number of suppliers, supplier brand awareness and status, product features, production capacity and sales scope, supplier industry chain, supply stability, price trends, willingness to participate in supply chain integration, etc. The resources provided by suppliers directly affect the price, sales volume and profit of the company’s products.

Analyzing new entrants

New companies entering the industry may compete with existing companies for raw materials and market share, resulting in a decline in the profitability of existing companies. Therefore, it is necessary to investigate the entry barriers of the industry and the response patterns of existing companies to new entrants.

Analyze alternatives

Two companies in different industries may compete because the products they produce are substitutes for each other. The research on substitutes includes sales growth rate, production capacity and profit expansion of substitute manufacturers, etc. The lower the price of the substitute, the better the quality, and the lower the user switching cost, the stronger the competitive pressure.

Analyze competitors

Identify competitors

First of all, you need to understand the overview of competitors, including who is the largest competitor, the number of competitors, the main advantages and disadvantages of competitors, etc. Competitors can be divided into brand competitors, industry competitors, form competitors and general competitors.

Identify competitors

Understand competitors’ sales data, data added to shopping carts, data added to favorites, etc. through data reports and paid tools automatically generated by each platform’s backend to ultimately identify competitors.

Analyze competitors’ goals and strategies

Competitors usually have goals such as market share growth, traffic leadership, technology leadership, and service leadership. Understand whether competitors are satisfied with their current position and what competitors’ goals are for different product market segments.

Analyze competitors’ strengths and weaknesses

Collect key information about competitors in the past few years, such as sales volume, market share, profit margins, cash flow, brand awareness, technology patents, etc. Focus on three variables: market share, psychological share, and emotional share.

Assess competitors’ reaction patterns

Each competitor will respond based on its own business philosophy when its opponents make price cuts, strengthen promotions, or launch new products. Companies need to adjust their strategies at any time based on their competitors’ response patterns.

Choose a competitor strategy

After analyzing the competition situation, formulate corresponding competitive strategies, generally choose areas where competitors are weak and where the company itself can improve, and take effective actions in order to obtain more returns.

Analyze buyers

Buyers are customers, the target market. Focus on the number of consumer groups, overall intentions and trends, and match their purchasing power.

Through the above analysis, cross-border e-commerce companies can better understand the competitive environment inside and outside the industry and formulate more effective competitive strategies.