What does this mean for digital marketing?
Specifically for digital marketing it is certainly true that new entrants are common to most markets and disruption is commonplace in the 21st century. Factors such as location, economies of scale, brand equity and technology are far less relevant for entering many industries now, for example technology businesses. Technology businesses have grown at pace in recent years and have attracted a great deal of investment as businesses look to disrupt the existing industries.
Many of the businesses being invested in offer digital solutions such as marketing automation, analytics, web reporter tools, and social media
In 2014 for example, funds worth US$1.4 billion were launched by London-based venture capital firms in just six months (London and Partners, 2014). Many of the businesses being invested in offer digital solutions such as marketing automation, analytics and social media. This results in the digital marketing industry being in a constant state of flux – and ensuring you keep pace with these changes is important.
Attending events, maintaining strong relationships with agencies and tech companies and reading the tech news are all important ways of doing this. Intensity of competitive rivalry Competitive rivalry is one of the more commonly understood competitive factors and is sometimes considered the most dangerous.
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The distinct features and behaviours of your competition directly affect your ability to gain competitive advantage. Alongside digital transformation there are many other factors, including:
- The competitors themselves: the number of competitors and their relative strength are key factors. If your industry has no industry leaders the playing field is fairly level and so competitor rivalry is increased.
- High exit barriers: if it is difficult to get out then more businesses will stay in, even if they are only breaking even or even losing money. Competition therefore remains high.
- Slow industry growth: if an industry is growing fast then all players can grow through acquisition without necessarily directly affecting the competition. All those new customers can be shared out. If growth is slow then there are no more customers but just as many companies, so to grow you need to acquire customers from your rivals.
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In markets where competitive rivalry is high, we move towards ‘perfect competition’ or in other words a situation where everyone competes at an even level with no ‘price makers’, only ‘price takers’. Price makers have the power to influence the price they charge, whereas price takers have no effect on the market. I would recommend more reading on Porter’s five forces and generally around economic theory to understand this in greater detail
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