Application of competitive forces in the business intelligence of Japanese SMEs

Abstract

Michael Porter's classic framework, ‘Five Forces’ presents the state of competition in an industry with five basic forces, such as the threat of new entrants, the bargaining power of suppliers, the bargaining power of customers, the threat of substitute products or services, and the industry jockeying for position among current competitors. Porter also shows how ‘value chains’ were the key to maintaining competitive advantage. In this paper, Japanese small and medium enterprises (SMEs) examine the relationship between each of the five forces, as well as activities in value chains and information technology (IT) strategy. Empirical findings in this research present how threats of new entrants and the bargaining power of customers are positively related to firms' IT strategy as well as business strategy, while other forces are negatively related to those strategies. The results on value chain activities imply that Japanese SMEs are focusing their business, as well as IT, strategy mainly on their primary activities, such as purchasing and logistics, manufacturing/operations, logistics/shipping, marketing and sales, and servicing.