Craigslist Five Forces

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Abstract Craigslist is an online auction and shopping website in which people can trade, buy or sell goods and services around the world. This paper comprises an analysis of the online classified ad service industry and the position of Craigslist business in the industry. Michael Porter’s five forces model is being analyzed to examine this industry. Also, three generic strategies and the value chain activities are primary determinants of the companies’ success in the future. These strategies and value chain activities are discussed to examine the online ad industry within the Craigslist in this report. Background Information Craigslist, founded by Craig Newmark in 1995, is described as a service industry where people can network,…show more content…
16). In Craigslist, buyers are people who are willing to spend their money on goods and services for the best deal possible. They are the ones who pay for the products and services being offered. The buyer power is moderately high because they are sensitive to price and willing to negotiate for the lowest price. Buyer power factors are the number of customers, their sensitivity to price, and availability of substitute products (Baltzan, 2011; p 16). Costumers can simply switch to competitor’s products and services because of high prices. Since the buyer power is high, Craigslist is willing to compete for the lowest price comparing to their competitors and other online classified ad service industries. Buyer power is relatively high due to the alternatives in the online classified ad industry. Supplier power is relatively low and the threat of substitutes is fairly high because consumers can go to other companies such as eBay. The threat of new entrants is high because it is not as difficult or expensive to start an online advertising business website and the entry barrier is fairly low because the Internet is being used in worldwide. Continuous improvement is necessary for Craigslist to achieve future goals. Craigslist can use their forums to communicate with sellers and potential buyers effectively. Also, Craigslist can increase the level of the privacy that costumers have and lower the fraud, abuse, and spam as much as possible. Additionally, Craigslist should consider the critical success factors and improve their quality of products, retain competitive advantages, reduce product costs, increase customer satisfaction, hire the best business professionals to succeed, and adapt to market changes quickly in the future (Baltzan, 2011). People, who are willing to

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