Introduction
Yahoo is an American-based, internationally operating Internet Company. The company’s headquarters is based at Sunnyvale in California (Yahoo, 2013). The company’s business areas include its search engine platform, Yahoo mail, Yahoo groups, Yahoo news, Yahoo answers and Yahoo finance, online mapping, advertising, social media, fantasy sports, and video sharing (Yahoo, 2013). The company is among the most popular in the US as well as at other countries, and serving its customers over more than 30 languages. There are five areas in the Porter’s five forces model, which are used to explain the competitive climate of a company. These different forces include the power of customers, the threat of new entrants into the industry, the power of supplier agents, competitive rivalry and the threat of substitute products (Gamble & Thompson, 2011). This paper will explore the competitive environment of Yahoo, in a structured and clear manner, towards exposing the ways that the company uses IT to counter competitive forces and to cultivate their advantage.
The threat of new entrants
The threat of entry does not affect the competitiveness of Yahoo, due to the following facts. Considering the fact that a new entrant would need to invest millions of dollars, towards developing a site to compare to Yahoo, yahoo have used the popularity of their internet platform as a mechanism of keeping new entrants out of the industry (Gamble & Thompson, 2011). Further, the Yahoo Company has taken advantage of the fact that it takes many years to build a company that will attract millions of internet users; the company has worked hard to sustain its customer-base and to recruit more over the internet platform, which makes it difficult for new entrants. The company has used IT to create economies of scale, including that, like their main competitors, including Google and Altavista; it has setup numerous servers across the world, which helps it collect information on user habits. The wide network allows the company to offer innovative, unified and customized products, in a better and faster manner, which blocks the entry of new industry players.
Brand loyalty is among the premises used by the company to eliminate the threat of new entrants, including that in the area of email communication, the company is the second best service provider, with more than 273.1 million users. Through the wide IT outreach, the company has eliminated the threats of new entrants, by ensuring that the costs of developing a new web-portal and recruiting the customers of Yahoo would time and resource consuming (Gamble & Thompson, 2011).
The power of customers
The bargaining power of the customers of the Yahoo Company is high, which is evident from a number of facts. These factors include the availability of substitute search engines in the market. In countering this threat to the business of the company, Yahoo has introduced highly interactive customer services that create an experience to keep their customers with their company (Gamble & Thompson, 2011). One example of these innovative services offered over the IT platform, with the aim of keeping its customers include that the company offers chat-services over its mail platform, it offers highly non-alterable security for e-mail users and also offers news alerts to its customers (Yahoo, 2013). Therefore, unlike other industry players, the company can keep its customer and attract more, by improving the outlook of their services, towards increase the confidence of their customers in the company (Yahoo, 2013).
The threat of Substitutes
The threat of substitute products is intensive for the company, because it is not the leader in the industry (Gamble & Thompson, 2011). For example, in the search engine service delivery, Google is the strongest competitor, and the dominant player in the search engine industry. Towards countering the high treat of substitute products, the Yahoo Company has expanded its service areas to areas that are not covered by other industry players (CSF, 2013). These innovative services include social networking services, college recruiting, social event calendar, user-enabled control of media players, photo sharing, online advertising and chat-services (Yahoo, 2013). Using these innovative service areas, the company has increased its competitive advantage against the major competitors in the industry, including Google.
In responding further, to the threat of substitute products from the main competitors, including Google, the company has worked on strategies of reducing the time spent by customers at its sites, trying new products among other areas. In realizing this, the company ensures that it tests its products to ensure that it is “highly robust than the ordinary internet software beta”, before releasing them into the market (CSF, 2013). The company has resolved towards this strategy, based on the realization that public testing highly expensive. Further, the company views that after releasing a faulty product into the market, many potential customers will not try the product again, due to the negative experience with it (Yahoo, 2013). Additionally, the company works hard to develop its IT-related products, to ensure that upon release, it will be very difficult for competitors to copy them.
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