Skype's 5 Forces Analysis

Skype’s 5 Forces analysis

Introduction

Skype is a computer program that enables individuals to carryout free voice calls over the Internet. Skype was first released to the public in the year 2003. With its humble initial development in the Estonian city of Tallinn, Skype has achieved an unparalleled level of success since its introduction. In April 2006 Skype had achieved 100 million registered users and has now grown to 443 million just by early 2009. Skype was founded with the goal of allowing users to make phone calls using the Internet as its medium. Their most basic product offers free PC-to-PC calls, instant messaging including video chat, and file sharing.

Porters Five Forces

Medium Competition

• Within the early years of Skype’s growth the company faced relatively little direct competition due to their cost effective peer-to-peer operating system. However, in recent years recognisable communications companies such as Yahoo, Google and Vbuzzer, along with the less well known Aim, MSN and Netmeeting, have launched rival peer-to-peer based systems. Within this group Yahoo presents the most realistic threat to Skype’s VoIP (voice over internet protocol) market position. Yahoo has a very well established brand name and a large consumer base due to its popular email and instant messaging services.

High Threat of Substitutes

• In 2005, Jajah a new telecoms was introduced, and is considered to be a possible substitute for Skype. Jajah enables individuals to use traditional type of phones that can be found in most households to conduct a VoIP call. Even though the cost of using the service is greater than Skype, it is still significantly cheaper than many of the standard phone rates and it does not require a computer or any downloaded programs.

• Traditional telecoms are also considered as a substitute for Skype, in a way where they have the ability to bundle phone calls all in one package with Internet and television.

Medium Threat of New...