How do you leverage information technology for your long-term business survival in the midst of competition? In this article, we explore five strategic benefits of information technology along the lines of Porter’s five forces of market and competitive analysis.
Refers to the advancement of hardware, software capabilities, telecommunications, database management, and other information processing technologies used in computer-based information.
A firm can survive and succeed in long run if it successfully develops strategies to confront the five competitive forces that shape the structure of competition in its industry:
- Threat of new entrants
- Rivalry of competitors within the same industry
- Threat of substitutes
- The bargaining power of customers
- Bargaining power of suppliers
Cost leadership; becoming a low-cost producer of products and services.
Differentiation strategy; develop ways to differentiate firm’s products and services.
Innovation strategy; finding new ways of doing business: unique products and services.
Growth strategy; expanding a company’s capacity to produce goods and services, expanding into global markets etc.
Alliance strategy; establishing new business linkages and alliances with customers, suppliers, competitors, consultants and other companies. E.g. mergers, acquisitions, joint ventures, etc.
Strategic uses of information technology
1. Lower costs – Use IT to reduce businesses processes and to lower the costs of customers or suppliers.
2. Differentiate – Develop new IT features to differentiate products and services.
3. Innovate – Create new products and services that include IT components; Develop unique new markets or markets niches with the help of IT.
4. Promote Growth – Use IT to manage regional and global business expansion.
5. Develop alliance – Use IT to create organisation of business partners. Example;
|CL||Buy.com||Online price adjustment||Lowest price guarantee|
|DFRTN||AVNET Marshall||Customer/supplier ecommerce||Increase in market share|
|INVSN||Charles Schwab & co||Online discount stock trading||Market leadership|
|Growth||Citicorp||Global intranet||Increase in global market|
|Alliance||Walmart||Automatic inventory replenishment by supplier||Reduced inventory costs/increased sales|