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The document provides a Porter's Five Forces analysis of the e-commerce industry in Pakistan and Daraz Pakistan specifically. It analyzes the bargaining power of buyers and suppliers, threat of new entrants and substitutes, and rivalry among existing competitors in the industry. The bargaining power of buyers is moderately high while that of suppliers is moderate. The threat of new entrants is low to moderate and threat of substitutes and rivalry among competitors is high in the e-commerce industry in Pakistan.

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99 views

Group Assignment

The document provides a Porter's Five Forces analysis of the e-commerce industry in Pakistan and Daraz Pakistan specifically. It analyzes the bargaining power of buyers and suppliers, threat of new entrants and substitutes, and rivalry among existing competitors in the industry. The bargaining power of buyers is moderately high while that of suppliers is moderate. The threat of new entrants is low to moderate and threat of substitutes and rivalry among competitors is high in the e-commerce industry in Pakistan.

Uploaded by

tech& Gaming
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Group Assignment

Strategic Management

Group members:
Umar Shafiq-180787
Usman Aftab-180759

Topic: Porter’s Five Forces Analysis

Date: 10/24/2021
Porter’s Five Forces Analysis of DARAZ Pakistan

Introduction:
E-commerce industry in Pakistan has been growing rapidly. In 2017
there were over 5 million online shoppers in Pakistan and this number
has increased to 47.6 million in 2021 and revenue that this market will
generate by the end of 2021 is projected to be US$3,904 million. These
stats show how rapidly the e-commerce market is evolving and still has
potential to grow.
DARAZ, an online marketplace and logistic company, is one of the well-
known retailers offering products from electronics, home appliances,
grocery shopping, apparel products (for kids and adults), to booking
services for travelling.

Following the Porter’s Five Forces Analysis of E-Commerce Industry:

Bargaining Power of Buyers


The bargaining power of buyers in this industry is moderately high
essentially because:
1. Customers now are well informed about products and
additional information which they might need is just one click
away.
2. They have plenty of choices from which they can shop and
hence, face no switching cost.
3. A lot of physical retailers (small and big) have started their own
online stores because already existing e-commerce stores have
increased pressure on them to retain customers.
4. The products offered by these local stores (iShopping.pk,
Buyon.pk, Home Shopping) are generally undifferentiated.
5. But global stores like Amazon and Ali Express give competition
to these local stores as customers assume their quality to be
better than these.
“The factors that can moderate bargaining power of buyers are strong
customer relations, brand image, prices and quality of products &
services. DARAZ has been providing variety of products in each of its
segment to its customer which reduces the customer’s bargaining
power to some extent”

Bargaining Power of Suppliers


Bargaining power of suppliers in this industry is generally moderate
because:
1. The online stores have set the criteria for products that suppliers
have to follow to get their products on their platform.
2. But on the other hand, these e-commerce businesses who do not
have stocking inventory system such as DARAZ majorly depends
on their suppliers to cater the demands of their customers.
3. For some products there are readily available substitutes at other
stores or at physical stores.
4. Supplier who has differentiated products based on variety,
quality, and size (specifically apparel products) get somewhat
more bargaining power.
“DARAZ is rapidly growing platform in Pakistan as it is introducing new
platforms and innovating rapidly, hence due to its high reach and high
engagement ratio, it limits the bargaining power of suppliers”

Threat of New Entrants


The threat of new entrants is relatively low to moderate in this industry
because:
1. Large investment in technology, marketing and human resource is
required to compete with already existing competitors.
2. Already existing businesses have gained consumer’s trust and
most of the market share has been already acquired by one or
two major players (DARAZ, AliExpress).
3. Existing online businesses such as DARAZ have advantages like
brand salience, brand loyalty, strong distribution channels,
permanent suppliers and access to raw materials that new
entrant cannot have as it enters into this market.
4. Achieving economies of scale would be difficult in this industry for
a new comer because it they cannot invest much and hence,
cannot enjoy cost advantage like big businesses.
5. Larger businesses like DARAZ and AliExpress who act aggressively
in market achieve scale economies by adapting different
strategies (which obviously require huge investment initially), for
example, DARAZ has recently introduced its own delivery system
which has made its distribution channel stronger and more
effective.
6. New entrants also have credible threat of retaliation from existing
big players. And might not be able to withstand the competition
given by the existing players.

Threat of Substitutes
Threat of Substitutes is very high in this industry because:
1. Consumers can shift from one online store to other online store
without having faced any switching cost.
2. Or if there is no online store that can fulfil the need of consumers
then, they can switch to the physical stores (which is their indirect
competition) with low or no switching cost.
“E-commerce businesses are trying offer higher value propositions by
improving customer care in addition to offering lower prices and better
quality. The threat of substitute is low for the online businesses who
offer differentiated products such as AliExpress have some products
that no other local e-retailer has in Pakistan”
Rivalry among Existing Competitors
Rivalry among existing competitors is high in this industry because:
1. There are large number of online stores (global and local), some
stores offer only apparel products (Buyon.pk), some stores offer
only electronics and some offer various kind of products ranging
from electronics, home appliances, and fashion products such as
iShopping.pk & Daraz.pk, which creates a perfect competition in
this industry.
2. Due to the fierce competition, all these stores compete on their
pricing strategies, product quality and product varieties offered to
the customers.
3. The number of online customers is increasing day by day and each
business in this industry is trying to get more and more customers
by offering new products, and by running more promotional
campaigns such as 11 November (11.11 sale) in which DARAZ,
AliExpress and other businesses in this industry gave huge
discounts on products, which makes competition fierce for small
online stores because not all of them can afford to invest this
much in marketing campaigns and give discounts.

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