Barriers to Market Entry
Barriers to successful e-commerce include many factors that restrict the capability of new organizations to enter and start working in a given industry. For instance, an industry may want new companies to make huge financial investments in equipment, or present companies may have earned strong loyalties from the clients that may be hard for new companies to overcome. The easiness of entry into some market sphere is one aspect of analysis; the others involve the power held by suppliers and customers, the nature of competition, and the degree to which comparable goods or services may act as substitutes for those provided by the business. It is critical for small business owners to remember all of these industry factors to compete successfully and make perfect strategic decisions. “Understanding your industry and anticipating probable trends provides you with the knowledge you require to react and control part of the industry” (Kenneth J. Cook, 1995). The ease of entry into certain industry is vital as it determines the probability that a firm will face new competitors.
In his work, Michael E. Porter described 6 main sources of barriers (Michael E. Porter, 1998):
Economies of scale. This barrier takes place when the unit cost of products (in this case masterpieces) lessens at the same time when production volume increases. When competitors have reached economies of scale, it acts as an obstacle by forcing fresh firms to fight. Luckily, the sphere of art does not suffer from this obstacle as masterpieces can not be called prime necessities.
Product differentiation. In many spheres, old and experienced competitors enjoy customer loyalty and brand identification. So, new organizations have to spend time and more money to differentiate their goods and overcome these difficulties.
Capital requirements. Another obstacle occurs when new firms are required to invest huge financial resources to compete in the present industry.
Switching costs. It refers to one-time cost that is incurred by a consumer in a result of switching from one product of the supplier to another’s. Some cases include retraining stuff, purchasing additional equipment, technical assistance, and redesigning products.
Access to channels of distribution. Present competitors control all possible channels of distribution through long-standing ties. So, new companies usually have to provide incentives in the form of discounts, promotions and advertising.
Government policy. Government may limit new organizations from entering Internet markets through licensing requirements, limits on access to some materials, pollution standards and so on.
ArtStar managed to overcome the majority of barriers successfully as it was one of the first world’s Internet art portals. So, it did not have many troubles with beginning its e-business. The site combined art-related content and powerful search functionality for: artists, artworks, services, Internet shopping, a library, and a utility section. Today ArtStar has something for everybody, from the art collector to the amateur enthusiast.
Barriers to market entry may alter over time. So, entry barriers should never be considered insuperable obstacles. While the Internet page is very youthful, it already astonishes visitors with sophisticated appearance and functionality. ArtStar’s ecommerce capabilities, active content update, and improved visibility are the key components that guarantee success of e-business.
Key Issues in Implementing E-commerce Strategy
Every site wants to sell, but too few may become successful. The approach of Ecommerce Partners differs from most other agencies. The value they deliver to the clients may be estimated in business terms, including superior Return on Investment, increased revenue and larger traffic.
The first step the ArtStar and Ecommerce Partners made was an attempt to understand the product, the industry, value proposition, the target audiences and the competitive environment. First of all it is very important to make sure that the company has a market and there are people who will purchase online. This was done with the help of concentrated research, collection of information and analysis. Another step was the deciding how to satisfy all the requirements of target audience with the help of use of dissimilar persons by user segment. This guaranteed the huge range of traffic and exchange. Lastly the company created a blueprint and roadmap that outline the project and the execution methods.
The shopping experience should be integrated. Consumers can purchase easily if their personal information and purchase history is stored for following purchases. ArtStar adapted the shopping process to some certain needs of its business. This completely reduces the shopping cart abandonment rate.
Content must be updated frequently. ArtStar optimized the administration for access by different users, including artists, buyers, printers, and framers. Artists, for instance, may upload own works’ pictures, post and edit biographies, and track sales statistics. Consequently, ArtStar has less administrative nervous tension, and customer service is considerably accelerated.
The purchase process should be extremely easy to use. So, only 13 months after the first public launch, ArtStar has been totally redesigned and has materialized as the world’s first true Internet portal concentrated only on the highly worthwhile, global art (Artstar.com Becomes the World’s First True ArtPortal Completely Redesigned to Focus on RevenueGeneration). The ArtStar technical infrastructure has been rebuilt with other software to facilitate more efficient updates of the webpage. This resulted in improved search results. Additionally, this has allowed for dynamically updated pages that may display information changes immediately. Particularly, newly developed software really reduces the expense of managing, updating and maintaining both content and offerings on the website.
Most importantly, ArtStar hosts three separate channels designed to maximize revenue potential and every channel consists of many revenue streams. Web site has a channel, loaded with content and search features. The second channel is created for artists. It lets them to exploit the vast resources of ArtStar to educate, profile, exhibit and sell their works. This channel has been made with business-to-consumer e-commerce in mind. The last channel is concentrated on the trade and can bring businesses together within the art industry by using site to facilitate B2B e-commerce.
Customer relationship management and personalization should be discussed. The Web suggests many chances for better understanding of customer’s behavior and for creating relationship with them.
It is very important for a company to purchase the appropriate software. There is no need to do the work internally, as there are many nice sorts of software for e-commerce. For instance, there is a dynamic tool so that photos of masterpieces posted constantly come into view in a combined gallery regardless of their size and shape.
A company should have a team. An e-commerce web site requires constant maintenance. Problems have to be fixed, new content should be issued and old one removed, and the Internet site must be constantly marketed.
If the company does not market, buyers won’t come. Creating up a web site is hard: nobody knows that you are there. The organization will need an insistent marketing campaign to reach the target audience. The perfect situation is a flawless integration with strategy of the offline business.
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Barriers to Market Entry