A firm can survive in the long run if it successfully develops strategies to confront five generic competitive forces that operate in the firm&apos;s relevant environment. What are some of these competitive forces? Threat of New Entrants. Many threats to long-term survival come from companies that do not yet exist or have a presence in a given industry or market. The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors. Teaching Tip: This is especially true as the effects of globalization increase the likelihood that previously &quot;domestic only&quot; competition will encounter new international competitors. Bargaining Power of Suppliers. Suppliers with access to key or limited resources, or who dominate their industries, may exert undue influence on the firm. Many firms seek to reduce their dependence on a single firm to limit the suppliers&apos; bargaining power. Rivalry Among Existing Firms. In mature industries, existing competitors are not much of a threat: typically each firm has found its &quot;niche&quot;. However, changes in management, ownership, or &quot;the rules of the game&quot; can give rise to serious threats to long-term survival from existing firms. Teaching Tip: For example, the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt. Bargaining Power of Customers. Customers can grow large and powerful as a result of their market share. For example, Wal-Mart is the largest customer for consumer package goods and often dictates terms to the makers of those goods -- even a giant like Procter & Gamble. Threat of Substitutes. To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists. Teaching Tips This slide relates to the material on p. 50.
1 hrly eb ch 02 competitive advantage
Porter ’s Model
Competitive advantage using e-commerce
The Competitive Environment
• To survive requires the competitive
positions not less than the other company
within its market sector.
• Technology can change the way businesses
Strategic Information Systems
• Any kind of information system that uses
information technology to help an organization
gain a competitive advantage, reduce a
competitive disadvantage, or meet other
strategic enterprise objectives.
Porter’s Competitive Forces Model
To survive and succeed, a business must
develop and implement strategies to effectively
– Rivalry of competitors within its industry
– Threat of new entrants into an industry and its markets
– Threat posed by substitute products which might
capture market share
– Bargaining power of customers
– Bargaining power of suppliers
Porter’s Five Forces
Model of Competition
Threat of New
Competing Firms in
Threat of New Entrants
• The ease with which a new company or a company
in a different product area can enter a given trade
• Barrier to entry into market include the need of
capital, knowledge and skills.
• IT can be barrier to entry to a given market. Ether
existing players in the sector are well or the
converse is that development of IT may leave
• Examples: Internet bookshops like amazon.com
compare to traditional bookshops, Internet banks
compare to branch bank.
Threat of substitution
• It’s a threat to a existing players where a new
product becomes available that supplies the same
function as the existing product or services.
• Example: replacing of glass bottles by plastic
alternative in packaging industry.
• IT industry has itself substituted of many products.
• Example: replacement of typewriter by the word
processor, downloaded music from the artist’s web
site being substitute for conventional supply chains.
Bargaining power of buyers
• There are number of competitors in the market or a
surplus of supply the buyer is in a strong position to
bargain for a low price.
• The braded products are defensive that the store will
feel obliged to stock because customers expect it.
• ICT facilitate a level of service that will keep the
• Examples: short cycle times, quick response supply,
and reliable services enabled by E-commerce
Bargaining power of Suppliers
• E-commerce used to reshape the supply chain.
• Organization directly deal with small trade and
members of the public using e-commerce that
replacing the intermediaries.
• Competitive advantage, in all three categories, can
be achieved using e-commerce for direct sale.
• This process of disintermediarisation can save cost
of distribution, allow an organization to differentiate
its products or focus its attention on selected
segments of the market.
Bargaining power of supply
• The organization always trying to get adequate price
from its buyer will be looking to get favorable terms
from its own suppliers at the nest stage along the
• For supplier, the strategies of price and
differentiation such as branding or quality of
services give a strong competitive position.
• Trade electronically is the factor in the quality of
service and now it’s the requirement from the buyer
Competition between Existing
• The competition is to get the buyers and to trade at a
price that produces an acceptable profit.
• Competition won by the generic competitive
advantage of price, differentiation or focus.
• The use of E-commerce:
– To reduces the administration costs of trading.
– To reduce stockholding cause to increase logistic efficiency
and greater reliability of supply.
– To meet the requirements of trading partner that trade is
– To differentiate the product or services from the competitors.
– To disintermediarisation.
– To provide new market or service.
E-commerce for competitive
•Reduces entry cost
•New sales channel
•New service opportunity
(& Trading Buyers)
•New sales channel
Strategic Information system
Porter competitive Forces