Threats of Entry in Kuwait
Discuss about the Making Sense of Strategy in Kuwait.
In the current competitive global market, organizations need to understand the impact of the internet and digital technologies on Porter’s competitive forces to be able to succeed. The first step to business success is analyzing the external environment to understand the opportunities and threats in the respective markets and the impact of emerging technologies on the five competitive forces. Strategic planning helps organizations, especially small-scale entrepreneurs, to overcome threats of entry into new markets. Several factors such as economies of scale, differentiated products, and cost of switching are threats of entry to new entrants in Kuwait, and local organizations rely on strategic planning to overcome them.
Competitive rivalry is one of the competitive forces and the internet and digital technologies are fueling the rivalry as the entry as exit barriers go down. The technologies help organizations to develop comparatively low-cost digital business models (Michael, 2008). Currently, new entrants can start operating in a country such as Kuwait without renting or owning physical assets. Besides, new entrants are able to leverage internet marketing and reach out a wide audience without necessarily spending much capital. As such, this competitive force opens the ways for small businesses who understand the market to share the market with existing competitors, which eventually increases rivalry.
The next force is the threat of new substitutes, which the technologies affect by introducing digital substitutes or hybrid substitutes. Before the emergence of the digital tools, taxi services in Kuwait, for example, had offices where clients would find them. Currently, some of the services such as Uber serve their customers through a digital application so it uses a hybrid model. Since switching costs are low, the threat of substitutes is higher during the current technological era than before (Grant, 2013; Michael, 2008). In the case of taxi services, customers have the power to change from the traditional model to the new one by installing the appropriate application. The new system offers greater convenience than the older one, making the propensity to switch high.
The internet and digital technologies also affect the bargaining power of buyers as they help to meet the needs and expectations of consumers. Digital customers have a new set of expectations, and the technologies bring about continual corporate innovation across operations and products, which play an important role in amassing a significant amount of bargaining power (Kamran, 2013; Campbell, et al., 2011). The power is increased due to the current instant access to information on digital channels such as social media. From these sites, consumers access the benefits and costs of different products. Other essential pieces of information that they get from these sources are the availability of substitutes and usage of products. Therefore, the technologies empower buyers to know what they need and be able to demand to be served appropriately.
Additionally, the internet and digital technologies have a significant impact on the bargaining power of suppliers, which is another critical competitive force. Suppliers are pleased to adopt the technology if it contributes positively to their businesses (Omsa, 2017; Bruner & O’Connor, 2017). As such, some of them who have not known the benefits of the technology are trying to slow down the adoption of digitally based business models. Ride-sharing and room-sharing are some of the most common legal and business issues that embrace the observance of established rules. In these areas, suppliers work hard to ensure all business process and innovations accord to the traditional regulatory practices. This new development is essential for ensuring the emerging technologies do not promote the creating of dishonest business practices. The bargaining power of suppliers in this category is essential for ensuring honesty is a constant factor in all business operations. According to Michael, Barbara, & Samuel (1998), more organizations, given the need for businesses to form new partnerships and ensure the current ones are efficient, will keep turning to digital technologies to help accelerate their business models. The internet and digital technologies are, therefore, playing a central role in increasing the bargaining power of suppliers as they have information on the best strategies they need to use to remain in business.
Impact on Competitive Rivalry
The entry of new competitors is another competitive force, and the internet and digital technologies are influencing the force as is changing the nature of competition. Due to the emergence of these technologies, modern businesses do not need to worry about the traditional competitors (Villani, 2013; Mathews, 2013). New entrants from outside the industry are becoming a major concern for all industries. For example, software manufacturers are also offering digital ways to transfer money. Banks, for that matter, have software manufactures as new competitors in the market. These new competitors are well equipped with efficient value proportions and digital business models as these new entrants are often giants in the technology industry who have envisioned and created the business model. The business models are more attractive as new platform ecosystems power them. Besides, given the organizations understanding of ways to leverage technology, they use the cloud, mobile and social media technologies to market their products and reach a wide range of customers (Michael, et al, 1998). In addition, they use cybersecurity, artificial intelligence, and the Internet of Things to improve their platform’s value proposition.
There are several threats of entry to new small businesses in Kuwait, and one of them is the economies of scale. Several companies in the country manufacture and sell at a large scale. As a result of this, they enjoy cost advantages (Tan, 2011). The fact that cost per units is low when operating on a large scale cannot be diminished completely by the contribution of technology. The more local companies in Kuwait produce, the more the benefit they register. Since many existing companies in the country have this advantage, new entrants in small-scale entrepreneurship have some difficulty to enter the market as they have to match the scale to benefit from similar cost advantages (Khouja, 2014). While this may not be completely possible at the initial stage, the new entrants can rely on the internet and digital technologies as this ensure they can survive on a limited budget after developing the required relations with stakeholders.
Differentiated products can also be a barrier to entry into the Kuwait market. Many businesses in the country know the essence of strategic planning and are using a variety of strategies, including differentiation of products, to succeed in the local market. As such, these companies have to develop a strong brand identity in the country, and so new entrants force an uphill task getting established in Kuwait (Hitt, 2017). However, these small businesses can invest heavily in creating products with new and unique benefits to successfully enter the local market saturated market. Besides, the new entrants need to focus on improving customer experience. In this way, they can break the current brand loyalties and attract and retain many of the customers.
The other common barrier to new entrants in Kuwait is high capital costs. Industries that require high capital costs at the initial stage prevent small companies from investing in them. The huge capital requirement, therefore, acts are a barrier to entry (Hitt, 2017). Effective use of emerging technologies such as the internet and building a strong brand identity from the onset is essential for breaking the barrier. Alternatively, the organizations can buy a franchise license and benefits from the reputation of an already established brand in the country. In this, way, they can break the high capital cost barrier as they develop strategic business relations in Kuwait.
High cost of switching is another market entry barrier in the country. When businesses want to move from one location to another, they first consider the cost associated with the move. If the cost is high, that might serve as a barrier (Hitt, 2017; Dess, 2012). The Kuwait government has enacted laws that protect local strategic and infant industries. As such, the switching cost for operating in those industries is high. Businesses wanting to invest in the country should find ways of removing the costs. Some strategies are making local experts leaders of the organization and creating employment for many youths.
Conclusion
The internet and digital technologies have changed the way people do business. The technologies have changed the concept of competition and created a level playing ground for all players. As such, technology is disruptive to traditional business models, and business executives must devise better ways to deal with the new challenges. Technology, however, is an essential tool for overcoming market entry barriers. Small businesses that want to enter the Kuwait market need to use effective use of strategic planning to beat the competition.
References
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Hitt, M. A. (2017) Strategic management, competitiveness & globalization: concepts and cases. New York: Cengage Learning.
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Villani, G. (2013) Valuation of R&D investment opportunities with the threat of competitors entry in real option analysis. Computational Economics, 43(3), 331-355. doi:10.1007/s10614-013-9370-2.
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