According to Porter (1979), the competition of a business is analyzed on the basis of threat of new entrants, threat of substitute products, bargaining power of suppliers, bargaining power of buyers and industry rivalry. These variables determine the attractiveness of any industry along with the competitive intensity. The firm should pay attention on these factors along with the impact of information system on each variable while developing competitive strategy.
Because of information technology, business models are changing, new strategies are being formulated and new business models are being created (Wallace, 2015). Thus the competitive strategy should be formulated based upon these factors. The company may choose any of the following strategies to distinguish itself from the competitors applying information systems:
Cost Leadership
The firm can eliminate unnecessary costs related with the manual paper works and human resources by adapting information system. Automation helps in achieving efficiency by reducing operational costs because of which similar products can be offered at lower rate. This results in the reduction in cost of customers or suppliers and increment in cost of competitors. The firm can establish itself as low cos cost procedures. Dell computer used his strategy to gain competitive advantage. It customized the computers as per the requirement of customers by developing an information system to record the order of the customers which allows the customers to buy computers at lower price.
Differentiation Strategy
The information system can be applied in differentiation strategy as well. We can focus on a niche market and offer something different including new features to rise above our competitors. Moen Incorporation, a faucet brand in North America asks for the design with customers via online that makes it different than the competitors.
Innovation Strategy
Innovation strategy includes offering something new including information technology. It helps to create new market by changing the business processes. Offering unique products and creating demand for it can help in gaining competitive advantage. Amazon used this to its benefit by providing online shopping experience to the customers.
Growth Strategy
With the use of information system, we can plan for growth and extension of existing business. The technology can be used for integration and diversification of the product as a competitive strategy. This strategy has been used by Walmart where they place order through global satellite network.
Alliance Strategy
Information system allows building alliance with customers, suppliers, competitors, consultants and other firms through mergers and acquisitions. Information system facilitates virtual interactions to build alliance that can help in gaining competitive advantage for a business. The automatic inventory replenishment by suppliers in Walmart is an example of how alliance can be built through use of information systems.
References
Porter, M. E. (1979, May). How Competitive Forces Shape Strategy. Harvard Business Review, 59(2), 137-145.
Wallace, P. (2015). Introduction to I
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According to Porter (1979), the competition of a business is analyzed on the basis of threat of new entrants, threat of substitute products, bargaining power of suppliers, bargaining power of buyers and industry rivalry. These variables determine the attractiveness of any industry along with the competitive intensity. The firm should pay attention on these factors along with the impact of information system on each variable while developing competitive strategy.
Because of information technology, business models are changing, new strategies are being formulated and new business models are being created (Wallace, 2015). Thus the competitive strategy should be formulated based upon these factors. The company may choose any of the following strategies to distinguish itself from the competitors applying information systems:
Cost Leadership
The firm can eliminate unnecessary costs related with the manual paper works and human resources by adapting information system. Automation helps in achieving efficiency by reducing operational costs because of which similar products can be offered at lower rate. This results in the reduction in cost of customers or suppliers and increment in cost of competitors. The firm can establish itself as low cos cost procedures. Dell computer used his strategy to gain competitive advantage. It customized the computers as per the requirement of customers by developing an information system to record the order of the customers which allows the customers to buy computers at lower price.
Differentiation Strategy
The information system can be applied in differentiation strategy as well. We can focus on a niche market and offer something different including new features to rise above our competitors. Moen Incorporation, a faucet brand in North America asks for the design with customers via online that makes it different than the competitors.
Innovation Strategy
Innovation strategy includes offering something new including information technology. It helps to create new market by changing the business processes. Offering unique products and creating demand for it can help in gaining competitive advantage. Amazon used this to its benefit by providing online shopping experience to the customers.
Growth Strategy
With the use of information system, we can plan for growth and extension of existing business. The technology can be used for integration and diversification of the product as a competitive strategy. This strategy has been used by Walmart where they place order through global satellite network.
Alliance Strategy
Information system allows building alliance with customers, suppliers, competitors, consultants and other firms through mergers and acquisitions. Information system facilitates virtual interactions to build alliance that can help in gaining competitive advantage for a business. The automatic inventory replenishment by suppliers in Walmart is an example of how alliance can be built through use of information systems.
References
Porter, M. E. (1979, May). How Competitive Forces Shape Strategy. Harvard Business Review, 59(2), 137-145.
Wallace, P. (2015). Introduction to I