An Examination of Porter’s Competitive Strategies in Electronic Virtual Markets: A Comparison of Two On-line Business Models

Chul Mo Koo, Chang E. Koh, and Kichan Nam
International Journal of Electronic Commerce,
Volume 9, Number 1, Fall 2004, pp. 163.

Abstract: Porter’s framework of four competitive strategies (cost leadership, market differentiation, innovation differentiation, market focus) is used to compare the market strategies of firms operating solely in an electronic virtual market (“on-line firms”) and firms operating concurrently in the traditional and electronic markets. It also examines the connection between the competitive strategies and business performance in electronic markets. A survey of 123 firms in South Korea found that Porter’s competitive strategies are relevant to electronic markets. Depending on their operating model, firms tend to choose different competitive strategies. On-line firms incline to differentiation strategies, whereas click-and-mortar firms prefer strategies based on market focus. Because the strategies firms choose for competitive strength are not necessarily the best ones to improve business performance, firms competing in an electronic market need to reassess their competitive strategies and reallocate their resources to maximize the return on their investment.

Key Words and Phrases: Click-and-mortar firms, competitive strategy, five-forces model, electronic markets.