Porters Five Forces & Value Chain

Day #2

Porter’s Strategic Models:
The Five forces and the Value Chain

CIS Department

Professor Duane Truex III

The Information Systems Strategy Triangle
Business Strategy

Organizational Design Strategy

ICT/Information Strategy

Professor Truex

E-CommercePrinciples

1

HOW CAN INFORMATION RESOURCES BE USED STRATEGICALLY?

Professor Truex

E-CommercePrinciples

Aligning IS/ICT strategy (Infrastructures) with business strategy
• Using multiple approaches to evaluating the strategic landscape is helpful in determining strategic opportunities. • Here, we look at three such approaches: – Porter’s five forces model of the competitive advantage of firms – Porter’s value chain model of internal organizational operations – Wiseman’s theory of strategic thrusts and strategic option generator
Professor Truex E-CommercePrinciples

2

The Five Forces Model and IS
• The Five Forces Model provides a way to think about how information resources can create competitive advantage. • Using Porter’s Model, General Managers can: – Identify key sources of competition they face. – Identify uses of information resources to enhance their competitive position against competitive threats – Consider likely changes in competitive threats over time
Professor Truex E-CommercePrinciples

Five Forces Model

Professor Truex

E-CommercePrinciples

3

Porter’s competitive forces with potential strategic use of information
Strategic use •Cost effectiveness •Market access •Differentiation of product or service

Potential threat •Switching costs of new entrants •Access to distribution channels •Economics of scale

Strategic use

Bargaining power of suppliers
Strategic use •Selection of supplier •Threat of backward integration
Professor Truex

Industry competitors Threat of substitutes

Bargaining power of buyers
Strategic use •Buyer selection •Switching costs •Differentiation

Strategic use •Redefine products and services •Improve