Porter’s Five Forces model could be used to generate IT strategies. Provide and explain ten (10) strategies as examples. (two (2) strategies for each of the five forces)
Title : Use of Porter’s Five Forces Model to generate IT strategies To : Senior Management Team of Great Guitar
From: Consultant of Systems Alive International
Date : 16th April 2013
2.1.2 Executive Summary
The purpose of this report is to identify ten IT strategies by making use of Porter’s Five Forces Model. A brief explanation of each of the five forces has also been highlighted and how Great Guitar utilises them in order to formulate IT strategies so as to meet the competitive edge.
Information Technology (IT) has taken the business environment by storm. IT has gone from a supportive role in organisations to becoming an integral part of corporate strategy. Nowadays there is a growing relevance of IT as a strategic weapon. Hence, in order to develop a competitive edge over rival firms, Great Guitar can use Porter’s Five Forces Model by incorporating IT strategies so as to survive in this rapidly changing world. The model will help Great Guitar to understand both the strength of its current competitive position and the strength of its intended position.
2.1.4 Porter’s Five Forces Model
The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model. As shown in figure 1.0 below, Porter identified five competitive forces that determine industry attractiveness and long-run industry profitability. The impacts of IT on these competitive forces have also been highlighted.
Figure 1.0: Porter’s Five Forces Model
Source derived from Porter, M. E.; Millar, V. E.(1985) How information technology gives you competitive advantage. Harvard Business Review, 63(4), pp. 149-160.
2.1.5 IT Strategy 1: Barriers to Entry Strategy and Threat of New Entrants According to Dawkins et al. (1998), threat of new entrants to a great extent depends upon the barriers to entry. It is in the interest of Great Guitar to devise IT strategies to create barriers so as to prevent its competitors to enter the market. They can be either new companies, or companies which intend to diversify. Owing to little or no barrier to entry, there are nowadays several companies just like Music Instruments Direct who are selling more or less the similar products as Great Guitars. A strategy that can be used by Great Guitar to gain competitive advantage is to keep a good relationship with its customers and suppliers, as this ensures a long term survival. With the use of IT, Great Guitar, for instance, can provide online customer service and technical support by putting frequently asked questions (FAQs) on its Web site. Additionally, customers can obtain useful information from an online community by interacting with other customers regarding product queries. Thus, by being customer-oriented will allow Great Guitar to delight customers and retain them.
2.1.6 IT Strategy 2: Low cost Strategy and Threat of New Entrants By making use of IT in the form of internet can be very beneficial to Great Guitar as this can dramatically reduce the costs of obtaining, processing and transmitting information, thus changing the way Great Guitar does business (Porter, 2001). IT adoption can reduce the cost of marketing and advertising. For instance, Great Guitar can engage in daily online advertising by having a pop-up promoting its guitars on most of the popular websites instead of spending on billboards or pamphlets. As such, this can prove to be a potential barrier to entry for new entrants thus, inhibiting new competitors to enter the market as they would find the cost for adopting a similar strategy very high.
2.1.7 IT Strategy 3: Differentiation...