Pinterest Case Analysis
- Describe the extent to which Pinterest addresses Porter’s three generic competitive strategies and then briefly state why you believe that to be true.
Porter’s 3 generic strategy | Extent | Reasoning |
Differentiation | ***** | - They enjoy the first mover advantage.
- They managed to tap into a unique yet widespread desire to collect ideas.
- Furthermore added the social media element to it in that their users can connect with people of similar interest and share.
|
Cost Leadership | ** | - The onus of deriving content is on the user
- Promoter pins are easily targeted based on users’ pins
|
Focus | *** | - Currently 85% of users are women. So even though that may not have been Pinterest’s intention, it is perceived now as a feminate brand
|
- Make a quick assessment of the five competitive forces against the industry Pinterest has defined. Evaluate each of Porter’s five competitive forces on this industry and provide an explanation of why you reached this conclusion. Provide an overall statement about the competitiveness of that industry based on your analysis
[pic 1]
Porter’s 3 generic strategy | Extent | Reasoning |
Potential threat of new entrants | H | - Pinterest does not appeal to 2 large audience namely males and youth
- Already sites like gentlemint.com (pinterest for men) has been gaining users
- Copyright issues make them risky to shutting down completely
|
Bargaining power of suppliers | L | - Users uploading content don’t have control over the customization of the look or targeting to specific consumers
|
Bargaining power of buyers | M-H | - Pinterest may have the industry turnover ratio of pins to purchases but they have the highest transaction value. So possibility of leveraging this with a more of an etsy model might be useful so that pinterest can cash in too.
|
Threat of substitutes | H | - Pinterest is viewed more as a hobby/ project based site. Therefore it is top of mind when the need arises. It is not a place people go to browse.
- So there is nothing stopping other social media sites like facebook, integrating a pinterest-like section as they have done with news articles on the feed.
|
Rivalry among existing firms | L | - Companies like etsy is much more appealing to the handmade industry as it directly draws people with the mindset of doing business. So its possible that slowly pinterest users who gain widespread networks may just move to etsy
|
Having said this, Pinterest does have a strong business model in that, humans are enamored by creativity by nature. At the essence the need is a simple one and therefore this won’t be a phase. Pinterest may find itself soon surrounded by competitors for specialized ideas (one for crafts, weddings, gardening etc) and lose its user base. So Pinterest cannot afford to be complacent and keep molding the site to feedback.
