Question

The industrial competitiveness of Shopee Malaysia in the e-marketplace applying the Porter Five Forces model. In your opinion, what are the five (5) possible critical factors that you believe the involvement of the selected e-commerce website in the Malaysian e-marketplace could be a successful one? Rationalise them in DETAILS.

Answer 1

Porter's Five Forces model as outlined below can be used to stake out a position that is less vulnerable to attack from competitors, established or new, and erosion from buyers, suppliers and substitutes.

Threat of New Entrants:

• New entrants add new capacity and gain market share
• Put pressure on prices, investment returns
• Barriers to Entry:
• Economies of scale
• Brand identity
• Capital requirements
• Access to distribution channels
• Experience (learning curve)
• Differentiation (proprietary product differences)
• Switching costs

Suppliers'Bargaining Power:

• Powerful suppliers capture value themselves
• Switching costs
• Suppliers'concentration
• Brand power of supplier
• Presence of substitute inputs
• Threat of forward/ backward integration
• Strategic impact of inputs

Bargaining Power of Customers:

• Powerful customers force down prices, get better quality or service - capture more value
• Buyer concentration (mass retailer)
• Undifferentiated products or lack of branding
• Switching costs
• Ability to backward integrate
• Cost of merchandise to total purchases
• Price sensitivity

Threat of Substitutes:

• Are there substitutes?
• Relative price performance of substitutes
• Email vs. Postal services
• Video conference vs. travel
• Plastic vs. aluminium
• Switching costs
• Buyer inclination towards substitutes

Competitive Rivalry:

• High rivalry limits profitability
• Intensity of rivalry is high, if there are numerous players roughly equal in size and power, slow industry growth, high exit barriers, rivals are highly committed, undifferentiated products, intermittent overcapacity, perishable products

In the case of Shopee Malaysia, the e-marketplace is highly competitive with players such as Lazada, ASOS, Zalora, etc. Especially Lazada is a strong local player that rivals Shopee on quality and efficiency. There are also customer complaints being faced by Shopee on the preference given to suppliers and delayed delivery.

Although Shopee has carved out a niche for itself in terms of cost differentiation and support for sellers, it has to address the below critical factors in order to be successful.

1) Balance the power of suppliers with that of the buyers
1.1) Retain the cost breaks being given to sellers and the discounts for customers who buy in bulk as well as the option to bargain for cheaper prices
1.2) Increase accountability of sellers to buyers by ensuring due accounting process is followed and promises made are kept

2) Create Differentiation
2.1) Store only good quality and first-hand items
2.2) Create differentation through branding, specialised products and backward integration

3) Improved Customer Service
3.1) Focus on customer care
3.2) Provide good after-sales service and a guarantee policy
3.3) Institutionalize a flexible buyback/ easy return policy and fair cancellation rules
3.4) Ensure ad promises are fulfilled

4) Delivery Fulfilment
4.1) For faster and efficient delivery, plug gaps in the supply chain
4.2) Address the weak links in the delivery process to achieve reliability and timeliness

5) Technology Focus
5.1) Create a user-friendly app based on a scalable back-end
5.2) Continuously work on technology innovations