Companies make decisions all the time. Sometimes if the company is a big one, then the decisions are usually big ones too. One of these large decisions is the choice of if a company should enter into a new business segment or not. There is a very useful theory by Michael Porter who developed the Five Forces Model of Evaluating Business Segments. (Batlzan,Detlor,Welsh 2012) In today’s business top managers need structure when making decisions and this helps, but they also need accurate and up to date information from all parts of the business process. From suppliers, logistics, competitors, the industry and of course customers there must be information available to help make those decisions and they use business information systems to help with this. If it is big business or small they can benefit from using information systems. ( This paper will focus on the details of the Michael Porter’s model and how information systems help in the five force process. These forces are buyer power, supplier power, threat of substitute products or services, threat of new entrants and rivalry among existing competitors. The concept of these forces is that they influence how managers make the big decision to enter into a new market. If the forces show that the situation is too negative then the company might make a good decision and not go into this market and save a lot of money and problems. Buyer power means how many choices customers have a lot of choice where they are going to shop. If there are too many choices for buyers then they can just shop other places and competition might be very strong. Supplier power is also important. This means that if there are not enough suppliers then those small amount of suppliers can control th... ... middle of paper ... ...rson 3. Davoren (2014), The Three Fundamental Roles of Information Systems in Business, Demand Media; retrieved from http://smallbusiness.chron.com/three-fundamental-roles-information-systems-business-23681.html 4. Reiner K, Cegielski C (2011). Introduction to Information Systems, Supporting and Transforming Businesses (3rd ed) Maine, United States. John Wiley and Sons Inc. 5. Lundberg A.(2002), Wal-Mart:IT Inside the World’s Biggest Company, CIO.com Retrieved from http://www.cio.com/article/31174/Wal_Mart_IT_Inside_the_World_s_Biggest_Company 6. O’leary C, Rao S, Chad P (2004)Improving customer relationship management through database/Internet marketing: A theory-building action research project; European Journal of Marketing p.338-354 Retrieved from: http://search.proquest.com.libproxy.cbu.ca:2048/business/docview/237027147/6ECC17A4C6A34BADPQ/1?accountid=9874
Porter’s Five Forces Forces Grade Note Segment Rivalry Strong The current market is divided between a few powerful competitors that can relatively easily attract customers from one another as the switching costs are low and practical absence of product differentiation contributes to the easy loss of market share. Threat of Mobility Weak While the new entrants only need a relatively simple GUI and a supplier in order to enter the market, the federal and local regulations will require significant investments prior to any positive cash flow. Again, the differentiation is practically non-existent and the new entrants will have to compete with financially established enterprises capitalizing on competitive advantage. Supplier power Strong
Laudon, Kenneth C. Traver, Carol. E-commerce: Business. Technology. Society 3th ed. Pearson Prentice Hall. Upper Saddle NJ, 2007.
In determining the competitive intensity and attractiveness of the market, Porter’s five forces is a framework that would help analyze the manufacturing industry of Lincoln Electric and observe the external and internal environmental factors that influence business strategy development for companies within the industry. The five forces are assumed to determine competitive power in a business situation in which these five forces are Supplier Power, Bargaining Power, Competitive Rivalry, Threat of Substitution, and Threat of New Entry.
Bargaining power of suppliers analyzes how much power a business 's supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business 's profitability. (Arline, 2015).
In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.
The suppliers bargaining power is generally strong because of the big monopolies and the high importance of purchasing components and operating system, therefore it decreases the profitability of the market players.
Laudon, K. C. and Laudon, J. P. (2013). Part II: Information Technology Infrastructure. In Essentials of Management Information Systems (10TH ed., pp. 372-373, 402-403). Prentice Hall
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
Currently, businesses want to use the information effectively for competitive advantage to make better decisions that improve and optimize business processes, predict the market dynamics accurately, optimize forecasts to adequately maintain resources to name a few reasons.
According to Porters analysis, there are five basic factors affecting the operations of an organisation in any given market. These factors are bargaining power of suppliers, bargaining power of buyers/consumers, threat of competitive rivalry, threat of substitutes and threat of new entrants.
In today’s world, advances in technology have led to the development of materials, tools, techniques, and other means that make life easier, more efficient, and more productive. Businesses in the private sector as well as the governmental organization use those models, devices, and technologies for marketing purposes to help with marketing analysis, market entrance, data tracking for decision making, productivity, ability to serve their members or partners better by supplying quality products and virtual service to promote brand lifting, customer feedback, great customer experience, and offering the right product to the targeted market. Porter's Five Forces Model is one of the frameworks that help businesses develop their market strategy and analysis. This paper will focus on the Porter Model to evaluate a prospective market entrance for a potential movie rental business. Therefore, the five criteria for the model--Buyer Power, Supplier Power, Threat of Substitution, Competitive Rivalry, Threat of New Entry, and the movie rental industry will be scrutinize.
Richards, K., & Jones, E. (2008). Customer relationship management: finding value drivers. Industrial Marketing Management, 37, 120-130.
Porter’s five forces is a framework for analyzing an industry and business strategy development. It looks at forces that determine the competitive intensity of an industry and hence the overall attractiveness of that industry. The configuration of the five forces differs by industry. Understanding the competitive forces and their underlying causes reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition over time.
Companies are beginning to move their CRM application out of data centers and onto the cloud making CRM less expensive and easier to expand. (Shein, 2009) Technology advances are also allowing companies to begin to take better advantage of big data, combing internal data with social media and mobile to deliver more business value. (Goodwin, 2013) In the future, more devices will be connected to the Internet. Cars, buildings, bodies and many other things will be connected through sensors and it is expected that this increase in information will continue to drive the changes in CRM and how it is used to support sales, marketing and customer service. (Sartain,
Customer relationship management is a cross-functional process to achieve a continuing dialogue with customers, across all their contact and access point, with personalized treatment of the most valuable customers and to ensure customer retention and the effectiveness of marketing initiatives. It is also provide the chance for customers to interact with the brand.