External environmental analysis of Overstock.com using Porter's Five Forces

External Environmental Analysis

Overstock.com

This is an online business that offers direct retail sales as well as online auctions both at the international level and locally. It is an online market place where potential buyers can visit for designer brands and home goods at the best price bargains. It also offers a platform where sellers of items can get onto the market platform online and sell their items to other people within or outside the U.S.A.

Porter's Five Forces model and the overstock.com (Mind Tools Ltd., 2014)

Supplier power- this refers to the concentration of other businesses or suppliers that can provide the same service that overstock.com offers. This threat can be rated as high since there are several websites like amazon, ebay among several others that offer the same services.

Buyer power- this refers to the ease with which the buyers of the goods or services can drive down the prices hence undermining the competitive edge of the business. The buyers in this case are the people willing to have their products that are up for sale hosted in the overstock website and this threat is also considered high sinec due to the presence of other similar websites, once the product of the client does not move within a given number of days, they are tempted to try out the rival websites.

3. Competitive rivalry- this is a real threat within this industry since there are several competitors dealing in the same trade and overstock may have little competitive power in the contemporary business world as the suppliers and buyers can opt to go elsewhere in the event that they are not satisfied hence the threat here high.

4. Threat of substitution- this is the ability for the customers to find a different approach or way of doing exactly what you do. This threat is low to overstock.com since the online selling and buying at an international scale does not have an equivalent since it reaches the global market.

5. Threat of new entry- this refers to the ability of new players to get into the same market that one is dealing in. with the ever expanding online hosting and technological knowhow, this threat can be categorized as high since all it needs is for an IT expert individual to put up another website and a marketer to vigorously market it.

Ranking of overstock.com

Placing the business in a rank with a ranking system from 1-10 (in which 1 = vast gloom and doom for this company; 10 = Huge bonus this year! Opportunities abound), I would optimistically place it at 7.5 since the opportunities still abound in the online business since, as indicated above, the social network is widening each day, social, cultural and political barriers are not a threat to the online business and the reliability of technology and persistent improvement of the technology used in selling and delivering the goods gives a bright future to trade trends that will reliably take place across the globe within shorter times as days go by.