Discussion: Competitive Environment

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Discussion: Competitive Environment

Discussion: Competitive Environment

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Using Information Resources to Influence Competitive Forces Porter provides the general manager a classic view of the major forces that shape the competitive environment of an industry, which affects firms within the industry. These five competitive forces are shown in Figure 2.3 along with some examples of how information resources can be applied to influence each force. This view reminds the general

FIGURE 2.2 Information resources. Source: Adapted from G. Piccoli and B. Ives, “IT‐Dependent Strategic Initiatives and Sustained Competitive Advantage: A Review and Synthesis of the Literature,” MIS Quarterly 29, no. 4 (2005), 755.

IT Assets IT Capabilities

IT Infrastructure

• Hardware • Software and company apps • Network • Data • Web site

Information Repository

• Customer information • Employee information • Marketplace information • Vendor information

Technical Skills

• Proficiency in systems analysis • Programming and Web design skills • Data analysis/data scientist skills • Network design and implementation skills

IT Management Skills

• Business process knowledge • Ability to evaluate technology options • Project management skills • Envisioning innovative IT solutions

Relationship Skills

• Spanning skills such as business‐IT relationship management

• External skills such as vendor management

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38 Strategic Use of Information Resources

manager that competitive forces result from more than just the actions of direct competitors. We explore each force in detail from an IS perspective.

Potential Threat of New Entrants Existing firms within an industry often try to reduce the threat of new entrants to the marketplace by erecting bar- riers to entry. New entrants seem to come out of nowhere; established firms can diversify their business models and begin to compete in the space occupied by existing firms, or an enterprising entrepreneur can create a new business that changes the game for existing firms. Barriers to entry— including a firm’s controlled access to limited distribu- tion channels, public image of a firm, unique relationships with customers, and an understanding of their industry’s government regulations—help the firm create a stronghold by offering products or services that are difficult to dis- place in the eyes of customers based on apparently unique features. Information resources also can be used to build barriers that discourage competitors from entering an industry. For example, Google’s search algorithm is a source of competitive advantage for the search company, and it’s a barrier of entry for new entrants that would have to cre- ate something better to compete against Google. New entrants have failed to erode Google’s market share, which holds fast at 65% in the United States and at over 90% in Europe.6 Walmart, another example, effectively blocks competition with its inventory control system, which helps it drive down expenses and ultimately offer lower costs to customers. Any company entering Walmart’s marketplace would have to spend millions of dollars to build the inventory control system and IS required to provide its operations with the same capabilities. Therefore, the system at Walmart may be a barrier to entry for new companies.

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