The Impact of Information Technology on Porter Model of Competition
The Impact of Information Technology on Porter Model of Competition
Introduction
Michael Porter’s competitive forces model is a well-known framework for analyzing competitiveness. Competitive force model is used to develop demonstrates on how Information Technology can upgrade the competitiveness of a corporation. It is also used to develop strategies to increase competitive edge. Competitive strategy must grow out of a sophisticated understanding of the structure of the industry and it is changing. In any industries, whether it is domestic or international, the nature of competition is embodied in five competitive forces: (1) the threat of new entrants, (2) the threat of substitute products, (3) the bargaining power of suppliers, (4) the bargaining power of buyers, and (5) the rivalry among the existing competitors (Richard, E, pg. 16). In industries in which the five forces are favorable, such as soft drinks, mainframe, computer, Internet, database publishing, pharmaceuticals, and cosmetics, many competitors earn attractive returns on invested capital. The five competitive forces determine industry profitability because they shape the prices firms can change, the costs they have to bear, and the investment required to compete in the industry. The threat of new entrants limits the overall profit potential in the industry, because new entrants bring new capacity and seek market share, pushing down margins. Powerful buyers or suppliers bargain away the profits for themselves. Fierce competitive rivalry erodes profit s by requiring higher costs of competing advertising, sales expense
or passing on profits to customers in the form of lower prices. These five forces model show how it could endanger a company position in an industry. The Internet has changed the Porter’s competitive forces model, and this research paper will show now the impact of Information technology on the model of competition. How did the impact of information
Introduction
Michael Porter’s competitive forces model is a well-known framework for analyzing competitiveness. Competitive force model is used to develop demonstrates on how Information Technology can upgrade the competitiveness of a corporation. It is also used to develop strategies to increase competitive edge. Competitive strategy must grow out of a sophisticated understanding of the structure of the industry and it is changing. In any industries, whether it is domestic or international, the nature of competition is embodied in five competitive forces: (1) the threat of new entrants, (2) the threat of substitute products, (3) the bargaining power of suppliers, (4) the bargaining power of buyers, and (5) the rivalry among the existing competitors (Richard, E, pg. 16). In industries in which the five forces are favorable, such as soft drinks, mainframe, computer, Internet, database publishing, pharmaceuticals, and cosmetics, many competitors earn attractive returns on invested capital. The five competitive forces determine industry profitability because they shape the prices firms can change, the costs they have to bear, and the investment required to compete in the industry. The threat of new entrants limits the overall profit potential in the industry, because new entrants bring new capacity and seek market share, pushing down margins. Powerful buyers or suppliers bargain away the profits for themselves. Fierce competitive rivalry erodes profit s by requiring higher costs of competing advertising, sales expense
or passing on profits to customers in the form of lower prices. These five forces model show how it could endanger a company position in an industry. The Internet has changed the Porter’s competitive forces model, and this research paper will show now the impact of Information technology on the model of competition. How did the impact of information