Discussion: Enterprisewide Systems

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Discussion: Enterprisewide Systems

Discussion: Enterprisewide Systems

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Strategic Use of Information Resources

Industry Competitors Rivalry among the firms competing within an industry is high when it is expensive for a firm to leave the industry, the growth rate of the industry is declining, or products have lost differentiation. Under these circumstances, the firm must focus on the competitive actions of rivals to protect its own market share. Intense rivalry in an industry ensures that competitors respond quickly to any strategic actions. Facebook enjoys a competitive advantage in the social networking industry. Other sites have tried to compete with Facebook by offering a different focus, either a different type of interface or additional ways to network. Competition is fierce and many start‐ups hope to “be the next Facebook.” However, Facebook continues to lead the industry, in part by continued innovation and in part by its huge customer base, which continues to raise the bar for competitors.

The processes that firms use to manage their operations and to lower costs or increase efficiencies can provide an advantage for cost‐focus firms. However, as firms within an industry begin to implement standard business processes and technologies—often using enterprisewide systems such as those of SAP and Oracle—the industry becomes more attractive to consolidation through acquisition. Standardizing IS lowers the coordination costs of merging two enterprises and can result in a less competitive environment in the industry.

One way competitors differentiate themselves with an otherwise undifferentiated product is through creative use of IS. Information provides advantages in such competition when added to an existing product. For example, the iPod, iPhone, iPad, and iWatch are differentiated in part because of the iTunes store and the applications available only to users of these devices. Competitors offer some of the same information services, but Apple was able to take an early lead by using information systems to differentiate their products. Credit card companies normally compete on financial services such as interest rate, fees, and payment period. But Capital One differentiated its credit cards by adding information to its services; it provided customers their credit scores.

Each of the competitive forces identified by Porter’s model is acting on firms at all times, but perhaps to a greater or lesser degree. There are forces from potential new entrants, buyers, sellers, substitutes, and competitors at all times, but their threat varies. Consider Zara, the case discussed in at the beginning of this chapter. See Figure 2.4 for a summary of these five forces working simultaneously at the retailer and manufacturer.

General managers can use the five competitive forces model to identify the key forces currently affecting compe- tition, to recognize uses of information resources to influence forces, and to consider likely changes in these forces


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