IT and Porter’s Competitive Forces Model and Strategies

Abstract

Information Technology (IT) has revolutionized our economy and no organization can escape its impact. Using IT, new business models are being developed which could not be thought of earlier. As IT makes inroads into every aspect of organization, it is clear that strategies can be successful and have the competitive edge if they are integrated with IT. This is primarily because there have been reduction of operative cost and increase in productivity through technology adoption. As a result, IT cannot remain exclusive territory of IT/Electronic Data Processing/Computer department. Business managers now see the need to get directly involved in IT investment decisions and integration of IT with business processes and managing technological trends. Michael Porter’s theory of five forces, which defines the framework for formulating strategies through five forces, has to be integrated with technological capabilities of a firm to maintain competitive advantage. To make these integrations happen, managers need to understand IT in a holistic manner which will integrate business with IT. This chapter addresses the role of technology on the organizations’ strategies, how these five forces that Porter described are impacted by technology and how managers should plan to cope with the changing times with technology.