An Analysis of the Impact of the Internet on Competition in the Essay

An Analysis of the Impact of the Internet on Competition in the Banking Industry, using Porters Five Forces Model - Essay Example It helps to reduce physical and high operating cost (Johns and Perrott, 2008). For example, Amazon.com use internet that reduces its operating costs, so, it provides books at low costs as compared to large conventional bookstores. Requirement of knowledge: For the banks, large capital is required, but in internet banking, no physical networks are required. Online banking deliver services more economically and speedily. Internet banking changes the rules of competition for small and large banks and minimizes the importance of physical distance and location (Siaw and Yu, 2004). Brand building: Brand building is necessary for products and banking services that are undifferentiated. The internet creates the high-level image of brand that helps to make more informed purchase decisions for customers because they found everything on the web. The internet is helpful to change the balance of power for the customer’s benefits. Customer segmentation: Financial institutions can increase profits through effective customer segmentation. Internet banking is an effective channel for reaching customers. With the help of this, banks can target same customers through internet services (Johns and Perrott, 2008). On the other hand, customers gain more profits from internet banking as compared to traditional banking. So, it is profitable for banks to develop the lucrative market segment, identify profitable internet banking customers and target them. Customer relationship management: In the banking industry, a firm develops new products and other banks copy them quickly, so, customers shift from one bank to another and internet makes it easy for customers. Thus, to differentiate, banks should manage the relationship with customers (Momparler, Climent and Ballester, 2012). Through the internet, bank can provide product information and other services to target customers and maintain relationships with them for long-term profitability. Global market: Internet has