Porter's five forces model of competition analyzes five competitive forces that shape every industry: the threat of new entrants, the power of buyers, the power of suppliers, the threat of substitutes, and rivalry among existing competitors. The document discusses each of these forces and how information technology and e-commerce can be used to gain competitive advantages by countering these forces, such as by reducing costs, creating new sales channels, locking in customers and suppliers, and differentiating products and services from rivals. It also explains how e-commerce can help businesses achieve competitive advantages related to cost leadership, differentiation, and focus in order to compete effectively within their industry.

1. Chapter 2
Competitive
Advantage

2. Agenda
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Introduction
Competitive advantage
Porter ’s Model
Competitive advantage using e-commerce
Summary

3. The Competitive Environment
Threat of
New
Entrants
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors
Threat of
Substitutes
Bargaining Power
of Customers

4. Competitive Strategy?
• To survive requires the competitive
positions not less than the other company
within its market sector.
• Technology can change the way businesses
compete.

5. 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.

6. Porter’s Competitive Forces Model
To survive and succeed, a business must
develop and implement strategies to effectively
counter the:
– 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

7. Porter’s Model of Competitive Forces

8. Porter’s Five Forces
Model of Competition
Threat of
Threat of New
New
Entrants
Entrants
Bargaining
Power of
Suppliers
Rivalry Among
Competing Firms in
Industry
Threat of
Substitute
Products
Bargaining
Power of
Buyers

9. Threat of New Entrants
• The ease with which a new company or a company
in a different product area can enter a given trade
sector.
• 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
existing players.
• Examples: Internet bookshops like amazon.com
compare to traditional bookshops, Internet banks
compare to branch bank.

10. 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.
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11. 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.
Example: KFC
• ICT facilitate a level of service that will keep the
customer loyal.
• Examples: short cycle times, quick response supply,
and reliable services enabled by E-commerce
technology.

12. 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.

13. 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
value chain.
• 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
organization.

14. Competition between Existing
Players
• 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
conducting electronically.
– To differentiate the product or services from the competitors.
– To disintermediarisation.
– To provide new market or service.

15. E-commerce for competitive
advantage
Force
System
Competitive Advantage
New Entrants/
Substitution
Internet
E-Commerce
•Reduces entry cost
•New sales channel
•New service opportunity
Suppliers
(& Trading Buyers)
E-commerce
Logistics
(EDI)
•Cost reductions
•Quick response
•Lockin
Buyers
(Consumers)
Internet
E-commerce
•New sales channel
•Disintermediarisation
•Customer Information
Competitive Revelry
E-commerce
•Cost leadership
•Differentiation
•Focus

16. Review
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Competitive environment
Competitive Strategy
Strategic Information system
Porter competitive Forces
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