Porter's Five Forces Model

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Describe and discuss Micheal Porter's competitive forces model and how information systems may be used to influence a firms competitive position within it's industry. Provide a defensive and an entrepreneurial example of how information technology/systems could be used to influence each of the forces. Porter's Five Forces Model Porter's Five Forces model is often used as a tool for analyzing industries and competitive structures within them. An industry's profit potential is determined by either one or a combination of five competitive forces within that industry. These forces are: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and the…show more content…
Consequently, the focus within corporations on business unit strategy is on the external industry forces discussed previously. For IT strategy to be aligned with business unit strategy, it must be focused on external forces and the sustained competitive advantage this focus provides. Since IT has traditionally been focused on operations and data processing (i.e. internal matters), the debate is weather an internal focus on infrastructure and processes can ever lead to competitive advantage. IT infrastructure and processes tend to support efficiency: lower costs, faster transactions, higher quality, and production efficiency. The question, then, is whether these efficiencies can result is sustained competitive advantage. The key word here is "sustained." There is little question that internally-focused IT can produce competitive advantage, usually from being a "first-mover" or early adopter of a technology. The problem is that this advantage is short-lived. The primary reason internally-focused technologies do not lead to sustained competitive advantage is that the technologies employed are supplied by vendors (Evans, 1995) selling to all rivals within an industry. This makes these technologies tactical rather than strategic; focused on operational efficiency rather than sustained competitiveness. Strategic Technology and the Five Forces The central part of our theory of strategic alignment is that technology, in order to be
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