MIS Chap 2 - Information System as Competitive Advantage

What is Porter’s Competitive Forces Model ?

A framework that analyzes the competitive pressures in an industry. Consist of 5 forces which are

• Threat of Substitutes

• Threat of New Entrants

• Buyer’s Bargaining Power

• Supplier’s Bargaining Power

• Intensity of rivalry within the industry

What is Threat of Substitutes in Porter’s Model ?

Refers to buyers options when selecting between products. Better products in terms of cost and quality will have higher likelihood in getting chosen than poor ones.

What is Threat of New Entrant in Porter’s Model ?

Industries where new firms can enter more easily almost always have lower profit margins, and the firms involved each have less market share and thus increasing competition. Existing firms can protect themselves by erecting barriers to entry, such as patents and economies of scale

What is Economies of Scale ?

Industries where large-scale production leads to lower costs face less of a threat from new entrants. New firms would need to achieve a similar size to compete on price, which might be difficult or costly.

What is Patent ?

A legal right that gives the owner the power to stop others from making or selling their product for a set period of time in exchange of disclosing on how to produce it.

What is Buyer’s Bargaining Power in Porter’s Model ?

The pressure customers can apply to vendors to get better products, prices, or customer services.

What is Supplier’s Bargaining Power in Porter’s Model ?

The degree of control suppliers have over the price and quality of their products or services

What is Intensity of rivalry within the industry in Porter’s Model ?

The middle force where all the other forces affect. It refers to how intense the current competition is in the marketplace, which is determined by :

• the number of existing competitors

• what each competitor is capable of doing

Intense rivalry can limit profits and lead to competitive moves, such as price cutting or increased advertising

Rivalry is high when :

• There are a lot of competitors that are roughly equal in size and power (New Entrants)

• When the industry is growing slowly

• When consumers can easily switch to a competitors offering for little cost (Threat of Substitutes)

• Barriers to exit are high, forcing companies to remain in the industry even though profit margins are declining

What are the 3 Competitive Advantage Strategies ?

• Cost Leadership

• Differentiation

• Focus

What is Cost Leadership Strategy ?

Strategy to become the most cost-efficient producer in a market. The goal is to offer products or services at a lower price than competitors, while still making a profit.

What is Differentiation Strategy ?

Strategy that aims to make a company's products or services stand out from competitors. The goal is to create a competitive advantage by filling a gap in the market or addressing unmet needs.

What is Focus Strategy ?

Strategy that involves concentrating on a specific market segment. Involve identifying the niche, understanding the target audience needs and preferences and making their product cater to them.

Difference between Differentiation and Focus Strategy

A "differentiation strategy" aims to make a company's product or service unique across the entire market,

A "focus strategy" concentrates on a specific niche market segment, targeting the needs of that particular group rather than trying to appeal to a broad audience

Differentiation is about being unique in the whole market, while focus is about being unique within a specific market segment. 

Comparison between Porter’s 5 Forces and 3 Competitive Advantage Strategy

Role of ICT in Porter 5 Forces

What is Competitive Intelligence ?

Process of ethically gathering and refining enough information so that it can be used by a business organization to make strategic business decisions

What is Competitive Business Intelligence ?

The use of IT to continuously collect and analyze information about products, markets, competitors and environmental changes, and monitor the activities of competitors.

What does Competitive Business Intelligence achieve for an organization ?

Increase their market knowledge, improve knowledge management and raise the quality of strategic planning that then drives their business performance

What is Strategic IS ?

Specific objective of achieving better results than one’s competitors, which include providing new services to customers and/or suppliers, increasing customer switching costs, and locking in suppliers.

State 3 common types of Strategic IS

• Decision support systems

• Enterprises resource planning

• Database management system

What is Decision support systems ?

An interactive system used by individuals that have little experience with IT and analytical methods

What is Database management system ?

A collection of data stored together with their description and a hardware/software system where the data are managed, modified, retrieved and secured

What is Business Value Chain ?

• Series of steps a company takes to create a product or service, from the initial sourcing of raw materials to the final delivery to the customer

• Also assess whether different activities performed have the needed amount of value, and if some activities should be outsourced or terminated because they do not contribute much to the competitiveness advantage.