support the primary activities. These advances are then integrated across the firm or within one of the primary activities to add value. Information technology would fall specifically under this activity.Procurement:The activities involved in acquiring the raw materials used in the creation of products and services are called procurement. Business-to-business e-commerce can be used to improve the acquisition of materialsThis analysis of the value chain provides some insight into how information technology can lead to competitive advantage 42 | P a g e Created By Created Date Category ViewPoint Modified Date Kris Durham Top of the Document
Porter’s Five Forces:Porter looked at the impact of the internet on businessPorter developed the “five forces” model as a framework for industry analysis. This model can be used to help understand just how competitive an industry is and to analyze its strengths and weaknesses. The model consists of five elements, each of which plays a role in determining the average profitability of an industryThreat of substitute products or services: How easily can a product or service be replaced with something else? The more types of products or services there are that canmeet a particular need, the less profitability there will be in an industry. For example, the advent of the mobile phone has replaced the need for pagers. The Internet has made people more aware of substitute products, driving down industry profits in those industries being substituted.Bargaining power of suppliers:When a company has several suppliers to choose from, it can demand a lower price. When a sole supplier exists, then the company is at the mercy of the supplier. For example, if only one company makes the controller chip for a car engine, that company can control the price, at least to some extent. The Internet has given companies access to more suppliers, driving down prices. On the other hand, suppliers now also have the ability to sell directly to customers.Bargaining power of customers:A company that is the sole provider of a unique product has the ability to control pricing. But the Internet has given customers many more options to choose from.Barriers to entry: The easier it is to enter an industry, the tougher it will be to make a profit in that industry. The Internet has an overall effect of making it easier to enter industries. It is also very easy to copy technology, so new innovations will not last that long.Rivalry among existing competitors:The more competitors there are in an industry, the bigger a factor price becomes. The advent of the Internet has increased competition by widening the geographic market and lowering the costs of doing business. For example, a manufacturer in Southern California may now have to compete against a manufacturer in the South, where wages are lowerPorter’s five forces are used to analyze an industry to determine the average profitability of a company within that industryAdding in Porter’s analysis of the Internet, we can see that the Internet (and by extension,
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- Summer '16
- Kris Durham