The paper "Knowledge Base Representing Porter's Five Forces Model" is a great example of a Management Case Study. Incorporated in 1998, Akamai Technologies is an internet content delivery network company. Its network is among the world’ s largest distributed-computing platforms. The company’ s’ network server offers an infrastructure layer that speeds up the delivery of content. The company has witnessed rapid growth over the years (see Appendix A and B). However, from the case analysis, it is confronted by a growing competitive pressure that continues to challenge its profit margins. The stock has also slightly slumped.
A major challenge, however, is how to put barriers to entries. Faced by growing competitors in the niche market, Akamai’ s immediate challenge is to respond to the competition by creating barriers to entry. The number of competitors dealing in content delivery has increased to more than fivefold in a span of two years. The start-ups undercut Akamai’ s prices almost by half (Den Steen 2011). Demand has been slower to recover since the 2008 financial meltdown. Battling online video content delivery needs investing heavily in network capacity even as the market is becoming overcrowded with start-ups.
This would cut into the company's profits. The purpose of the report is to develop an effective competitive strategy in response to the growing competitive nature of the CDN market. Porter’ s (1985) five forces analysis is applied to determine its competitiveness. The report concludes that the company should lower the prices of its product offering while at the same time take advantage of economies of scale to make sure that it does not cut on its profitability. In addition, the company should improve the quality of its product through persistent innovation. Chapter 1 1.1 Background of the Study With over 790 million in revenue in 2008, Akamai Technologies has staged itself as a paradigm for scalable start-ups (Den Steen 2011).
The strategy of charging content providers and subsidizing the ISPs shows that the company operates within a two-sided market, which is characterized by a provider subsidizing the more susceptible side of the market and charging the one that is more responsive to creating value or growth of the company. The company’ s distributed servers are situated close to the end-users, hence accelerating content delivery.
This also allows internet service providers (ISPs) to conserve their bandwidth. Akamai hence reflects content across the globe as a result of allowing the ISPs to pay for improved delivery of content (Den Steen 2011). Since Akamai’ s content acceleration product offering hit the market in 1999, the company focused on transforming itself into a platform instead of its initial one-product stature (Den Steen 2011). The company’ s founding vision was to establish a global distribution platform, with the first being static content from websites.
Once this was set up, the next focus was on creating a suite of supplementary applications that structured colossus of technologies such as streaming media, e-commerce distribution, and whole site and dynamic page assembly (Yannopoulos 2011). Indeed, most of the demand for content originated from four major sources namely, e-commerce, media and entertainment, government agencies and high-tech. Media and entertainment have been the company's largest market segment generating between 40 and 45 percent of annual revenue (Den Steen 2011). The company’ s primary challenge was to prove it could replicate its success with its first product – content acceleration.
However, this has turned out to be difficult due to the growing number of the competitors in the CDN industry. There is, therefore, a need to develop an effective competitive strategy for the company (Porter 1996).
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