Effect of IS/IT on Competition

1. Effect of IS/IT on Competition V.T. Raja Information Management Department Oregon State University E-mail: Raja@bus.oregonstate.edu

2. Presentation Outline • Porter’s competitive forces • How to use IS/IT to combat competitive forces? • Examples • Strategic significance of IS/IT • Conclusions

3. Porter’s five competitive forces • Bargaining power of suppliers • Bargaining power of buyers • Threat of new entrants • Threat of substitute products/services • Rivalry among existing competitors

4. Bargaining Power of Suppliers • Example • Implications Hiked prices Poor Quality • Use IT to combat force - how?

5. Use of IT to combat force • Several suppliers • Computer network Electronic Data Interchange Advantage : • Select the supplier that gives the best deal

6. Bargaining Power of Buyers • Example • Implications Prices forced down Demand: High Quality More Services • Use IS/IT to combat force - how?

7. Use of IS/IT to combat force • Build in switching costs • Attract & keep customer ‘hooked’ by providing value-added services that require considerable investment in IS/IT • Example: Baxter Health Care

8. Threat of New Entrants • Implications Increased capacity Substantial resources Reduced prices Reduced profits • How to use IS/IT to combat force?

9. Use of IS/IT to combat force • Provide entry barriers Lead the way Hard to emulate Expensive Sophisticated Time consuming

10. Threat of Substitute Products/Services • Implications Ceiling on prices Returns limited • How to use IS/IT to combat force?

11. Use of IS/IT to combat force • Improve price/performance Less expensive Value-added features • Spawn new businesses Generate new products Create derived demand

12. Rivalry among existing competitors • How to use IS/IT to combat force? Change/Alter : Scope of competition Strategy Interrelationship among industries

13. Competitive scope/strategy • Scope of Competition Broad Scope Narrow Scope • Generic Strategies Cost Leadership Differentiation Focus Strategy

14. Strategies • Use IS/IT to change scope of competition Example: Wall Street Journal • Use IS/IT to enhance strategy Examples: Caesar’s Palace Nexis/Lexis • Use IS/IT to change strategy Examples: ‘ICE’ age Newspaper distributor

15. Conclusions • Analyze competitive forces acting on industry • Identify competitive force(s) that are critical to the firm • Use IS/IT effectively to combat critical competitive force(s)