Challenges for Internet start-ups versus brick-and-mortar

In today’s electronic and Internet based world, it’s easy for companies to start up and instantly reach consumers.  Whereas competition between brick and mortar stores was much slower to develop a decade ago, now days it does not take long for a competitor to copy an Internet business model and start challenging a company. Starting up an Internet company requires little capital when compared to a brick-and-mortar. A brick-and-mortar competitor has to choose a location, build, or move. The competition is able to conduct a little research and find out what strategic moves the competition is making. On the other hand, online competitors can rapidly emerge with little warning. To further complicate issues, many Internet companies generate revenue by selling a large volume of low margin products. As a result, it is now more important than ever to be able to differentiate oneself from the competition. Companies that will succeed in today’s Internet market need a sustainable competitive advantage. In addition, start-ups need to be able to understand and reach the intended consumer base with the proper value statement.

Taxi Magic was able to create an advantage by partnering with the taxi cab companies to integrate technology into the cab meters that would allow Taxi Magic to provide a never-before-seen service to consumers. This partnership has helped the company establish relationships with cab companies and as a result those companies might solely work with Taxi Magic instead of partnering with competitors.   However, even though Taxi Magic has built these relationships, there is still a threat from competition. Taxi Cabs could use GPS technology to provide similar service, and bypass the use of Taxi Magic’s website. In addition, competitors could offer the same service, using the other cab companies, for free.

MusicJuice.net was unable to establish a competitive advantage over the competition. The company was not the first to market and therefore had to offer some type of differentiation in order to attract users from the already-used competition. While there was some differentiation in products and services offered, MusicJuice.net was not able to use those features to attract consumers and quickly build up on the consumer base. The products being sold were all small margin items, so MusicJuice.net needed a very large active customer base in order to realize profits. The companies lack of marketing, combined with slow entry to the market, hampered its ability to steal a customer base away from the competition.