Five Forces it Is Important for Students

Five Forces

It is important for students to understand the relationships that formulate a business strategy. The five competitive forces that shape strategy, or more commonly known as Porter's five forces, help clarify and explain how business strategic approaches are influenced similarly across all industries. The purpose of this essay is to examine how business strategy and information technology relate in achieving competitive edge. I'll examine this subject by examining each of the five forces through the lens of information technology industries. Next, I'll identify and briefly describe the five specific areas in which information technology represents both a risk or may promote a company's competitive advantage within a particular industry. Furthermore, I'll identify certain steps to reduce the risk and promote how these processes can be leveraged to improve a firm's competitive edge.

THE FIVE FORCES

According to Porter, (2008) the five forces that determine the quality of the industry's competitive balance are as follows: the threat of the entry of new competitors, the threat of substitute products or services, the bargaining power of customers, bargaining power of suppliers, and the intensity of the competitive rivalry. Accordingly "using the five forces framework, creative strategic may be able to spot industry with a good future before this good feature is reflected in the prices of acquisition candidates " (p.6). The threat of substitute products or services describes the ability for us other products to be substituted in place of one's own. The threat of the customer is the power the consumer has over the company to control its strategic output. These suppliers deal with the ability of the firm to acquire necessary supplies to produce its product. Finally, the threat of the rivalry, is the most important due to the fact of its direct relationship to the firm itself.

INFORMATION TECHNOLOGY'S EFFECTS ON Business STRATEGY

Ong & Ismail (2008) suggested that "sustainable competitive edge from information and communication technology is only able to achieve through integration of information and communication technology with human factors in the firm This integration will provide a set of strategic resource to achieve sustainable competitive manager for the firm" (p.68). It is important to remember that human interaction with technology provides IT industry with its main product. The relationship between how businesses employ their overall business strategic plans and information technology needs to be interpreted in a manner that is consistent with the leadership and overall mission of any particular company. It is useless for companies to have excellent information technology that does not correspond to what the business or firm is trying to accomplish.

Powell (1997) supported the importance of information technology's integration, "contrary to the prevailing case studies and anecdotes, the findings suggest that, owing to information technology imitation by competitors, information technologies have not, in and of themselves, produced sustained performance advantages" (p. 375). When developing scenarios, hypothetical or not, is always important to take a large-scale view of the environment before applying any of Porter's five forces in determining how they can contribute to a firm gain a competitive edge over its rivals. Only when business strategy is accurately synthesized with information technology capabilities and programs, will information technology's effects on business strategy be felt in its most prodigious manner.

IT RISKS FOR COMPETITIVE ADVANTAGE

- Technology expires quickly

- Additional labor and management to oversee

- Practicality

-Accuracy

- Moral and ethical risks

IT AREAS THAT PROMOTE COMPETITIVE ADVANTAGE

- Knowledge is all powerful

- Speed

- Flexibility

- Deterministic Probability

- Forecasts and graphic representation

-Streamlined Operational Capabilities

SCENARIO ANALYSIS

#1 Expiring Technology

Information technology requires a certain amount of capital to employ their usefulness. Unfortunately, technology expires rather quickly in today's world. New components are often replaced rapidly where the user had not even had the chance to master the old technology before being introduced to the new one. Finding suitable and consistent technologies that can be upgraded without major disruptions while firms gain competitive advantage and avoiding falling victim to expiring technology.