Porter’s Competitive Forces Model and Information Systems
Porter’s competitive forces model is a conceptual framework broadly used to evaluate the competitive advantage of an organisation in the market. The model suggests that organisational competitiveness is affected by four market forces that could have a low, medium, or high impact on its market potential. The force of new market entrants suggests that depending on the labour mobility and resource availability, companies might find the new market realities either favourable or unfavourable.
The force of substitute products and services proposes that new companies may suggest cheaper or more efficient alternatives to the products already available in the market to attract new and existing customers. The power of customers force suggests that under the condition of high product differentiation, a customer could easily switch between product or service suppliers, which makes it complex to retain them. Finally, the power of suppliers suggests that the scarce presence of suppliers in a market brings them more power to raise prices and dictate their own conditions or terms of cooperation, which is natural for niche or developing markets.
The appropriate use of information systems strategies could help organisations to address the risks imposed by Porter’s competitive forces. First, the low-cost leadership approach allows integrating several critical systems such as inventory management, customer response tracking, and cash-to-pay strategy to advance business operations and reduce the time for service delivery. Second, the product differentiation approach will help to improve customer experience through customisation, live communication, feedback, and tracking. Finally, the market niche approach allows using information systems to analyse consumer behaviour trends and patterns through purchase, feedback, and trends analysis, which allows for further consumer profiling and targeting based on individual needs and preferences. Hence, organisations will be more confident in their efforts to sustain competitiveness if information systems are implemented.