The Impact of Information Technology on Porter Model of Competition
Introduction
Michael Porter’s competitive forces model is a well-known framework for analyzing competitiveness. Competitive force model is used to develop demonstrates on how Information Technology can upgrade the competitiveness of a corporation. It is also used to develop strategies to increase competitive edge. Competitive strategy must grow out of a sophisticated understanding of the structure of the industry and it is changing. In any industries, whether it is domestic or international, the nature of competition is embodied in five competitive forces: (1) the threat of new entrants, (2) the threat of substitute products, (3) the bargaining power of suppliers,
Information technology impacts competition in other areas as well. In the category of “New Entrants”, information technology has affected this force of Porter’s Competitive Advantage Model. The Internet is the major new concept in information technology over the last thirty years. The Internet has made it easier for new entrants to gain access to their market of choice. This raises the competition level of already established companies within an industry. The Internet reduces the number of barriers into the market. In the “old economy”, new entrants had to overcome many obstacles to even gain access into the market of choice. It was even harder to gain a foothold in the industry and become established. New entrants had to find some sort of advertising medium that was not too expensive but also very wide reaching. The owner of the company had to somehow get the name of his company out into the eyes and minds of the consumer. This was usually done by putting ads in newspapers, radio, and television. These advertising mediums were often expensive and often led to inconsistent success with sales. As you can see, in the “old economy”, market penetration was very hard and also very risky. In “today’s economy”, there is always the threat of new entrants into the market for the already established companies. Now, all a new company has to do to get noticed or even to set up an interactive storefront is to set up a