Porter's Five Forces Model
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 intensity of competition among current rivals within the industry.
The power of suppliers is high when a small number of suppliers dominate an industry, as is the case with Microsoft and Intel, which dominate the highly-fragmented PC industry. These suppliers of key components dominate price, terms, and quantities of operating systems and CPUs. The result is a PC industry that is far less profitable than the suppliers of critical components like Microsoft and Intel.
Suppliers also gain power when the supplied components are highly differentiated making switching from one supplier to another difficult. Suppliers also gain power when there are few substitutes for a component as is the case with CPUs.
Buyers have increased power in an industry when they are small in number and/or they buy in large volume. This is exemplified by the feed grain market dominated by a few large buyers like Cargill and ConAgra purchasing in very large volume. Coupled with a large, fragmented group of sellers (farmers), these buyers dominate the price structure. Similarly, the power of buyers increase when the product is undifferentiated, as is the case in commodities. This allows the buyer to switch from one supplier to another with relative ease. When a buyer
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 intensity of competition among current rivals within the industry.
The power of suppliers is high when a small number of suppliers dominate an industry, as is the case with Microsoft and Intel, which dominate the highly-fragmented PC industry. These suppliers of key components dominate price, terms, and quantities of operating systems and CPUs. The result is a PC industry that is far less profitable than the suppliers of critical components like Microsoft and Intel.
Suppliers also gain power when the supplied components are highly differentiated making switching from one supplier to another difficult. Suppliers also gain power when there are few substitutes for a component as is the case with CPUs.
Buyers have increased power in an industry when they are small in number and/or they buy in large volume. This is exemplified by the feed grain market dominated by a few large buyers like Cargill and ConAgra purchasing in very large volume. Coupled with a large, fragmented group of sellers (farmers), these buyers dominate the price structure. Similarly, the power of buyers increase when the product is undifferentiated, as is the case in commodities. This allows the buyer to switch from one supplier to another with relative ease. When a buyer