42 Technology Porter's Five

42 Technologies is a modern data analytics and reporting platform for retailers that started in 2013. After analyzing the Porter’s five forces that 42 Technologies is facing currently, I believe 42 Technologies should be wary of being replaced by other sources that provide similar services. 42 Technologies will most likely lose its customers for the following two reasons.

Large amount of existing rivals and relatively easy to be substituted

Due to the large amount of similar companies that currently exist in the market, it will be hard to compete with the technology giants like IBM and SAS. Furthermore, there are even free, widely-used open source technologies that allow users to analyze large datasets such as R and Python. As 42 Technology is providing a unique software product that automates an important process, companies may substitute it by doing the process manually with in-house designed program or by outsourcing it from other similar companies. A substitution that is easy and cheap to make can weaken 42 Tech’s position and threaten its profitability.

The market for data analytics is robust and barriers to entry are very low

The use of advanced analytics is on the rise as the companies want to have a competitive edge over their rivals and be able to forecast the future trends in a better way which would help companies optimize its decisions moving forward. The market for data analytics, in which companies develop tools to help customers derive insights from data, is incredibly robust. According to The Wall Street Journal, the spending on marketing analytics is expected to nearly double over the next two years from 7 percent to 12 percent. In such an attracting and booming market, more and more people want to enter the market. Most importantly, the capital costs of starting and scaling a business online are significantly lower than in the offline world and it is getting cheaper by the day to build an online business. Moreover, the new entrants might have better or more advanced technology catered to the market; therefore, companies that work with 42 Tech can choose to cooperate with the new entrants instead.

Potential alternative for 42 Tech to avoid this problem is to constantly update their program and differentiate themselves. Also, they need to attract more consumers while keep in a good relationship with the existing ones.

Porter’s Five Forces Analysis

1. Rivalry Among Existing Competitors (Medium)

- existence of inexpensive reporting tools in the market

- existence of open source analytic tools such as R and Python

- existing mature and well-from companies