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Competitive Advantage and Information Technology

The article "The Five Competitive Forces That Shape Strategy," from Harvard Business Review, presents a comprehensive view of how five major competitive forces shape the industry and strategic planning of businesses. Each force has specific ways that shape competition, which may influence strategy.

Please help with some ideas on the relationship between IT and a company's competitive advantage or strategy.

Identify and briefly describe five specific areas where IT represents a risk to a company's competitive advantage.
Identify and briefly describe five specific areas in which IT may support or promote a company's competitive advantage.
Select a disadvantage you identified, and provide a detailed scenario of how it would occur, and what steps might be taken to reduce the risk.
Select an advantage you identified, and provide a detailed scenario of how it could be leveraged to improve a company's competitive advantage.

Article used: The Five Competitive Forces That Shape Strategy, by Michael E. Porter, Jan 01, 2008.

Solution Preview

Identify and briefly describe five specific areas where IT represents a risk to a company's competitive advantage.

Specific areas from competitive forces perspective where IT represents a risk to a company's competitive advantage include:

1) Information technology breeds innovation in an organization and can help competitors to imitate company's offerings and come up with cheaper alternatives or substitute products and thus, causing significant losses to the first mover. Competitor's own R&D enabled by IT can also lead to creation of superior competitive products. Hence, IT can cause risk to a company's competitive advantage by allowing competitor to perform better in terms of new product introduction or by allowing them to copy or imitate company's offerings.

2) Lack of proper IT infrastructure in an organization can lead to wastage and inefficiencies and can erode competitive advantage created due to innovative products and services. Operational inefficiencies have led to problems in many multinational corporations.

3) IT enabled e-commerce infrastructure can allow competitors and new entrants to reach target customers quickly and capture strong market share. Web and e-commerce have redefined the physical boundaries of trade and allowed smaller companies to compete with established ones by providing easy and cost effective access to markets. Take the case of Amazon leading its way to the top of book retailing with the help of its IT and e-commerce infrastructure.

4) The use of IT causes significant risks pertaining to privacy and security of data and compliance related issues. IT infrastructure needs to be secured and companies need to establish code of conduct and policies regarding use of IT infrastructure in order to avoid compliance related issues. Penalties, fines and compliance related issues can break down company's reputation and competitive advantage.

5) IT has empowered consumers in today's world and have made them more informed and demanding in ...

Solution Summary

Discusses the impact of information technology on competitive advantage.

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