Porters Five Forces

Question one

Porters five force model could be used to generate IT strategies. Provide and explain ten strategies as examples.

Porters five force model represents the internal as well as the external attributes that effect corporations. External forces refer to the competition and internal forces refer to internal threats. Majority of businesses are focused on the customer or the end user. These forces halt the company’s ability to service the customer or make a profit. The Great Guitar is required to re-evaluate the business marketplace based on industry changes in order to implement strategies to combat competitive advantage.

Porters Five force model describes the forces as Horizontal and vertical. There are three forces from “horizontal” completion.

• Threat of substitute products/services.

• Threat of established rivals.

• Threat of new entrants.

Forces that are represented from “vertical” completion are:

• Bargaining powers of suppliers.

• Bargaining powers of customers.

Threat of new entrants

Within the I.T industry the profitable markets that yield high returns will attract new firms, this is evident in the cell phone market where the latest innovation yield high returns and in turn forces companies such as Samsung, Apple and Blackberry to constantly keep up to date with market needs and trends. New entrants mean that profitability will decrease as more competitors enter the market. To avoid this, certain strategies must be introduced by organisations such as Great Guitar. A strategy that can be adopted is developing existence of barriers of entry that prevent competitors entering the market. This can be in the form of patents, such as technology patents used by software companies to prevent the copyright of their technology. A software patent can be defined as an allowing inventors the exclusive right to their writings and discoveries. Great Guitar could achieve this by adopting patents on their instruments. A key example of this was in 2006 between Microsoft and Novell, they announced a joint partnership agreement to protect their respective products, and they also set up a joint research facility.

The graph below show the increase in the use of patents in the USA. It can be clearly the increase and the steady growth.

Another strategy would be to join “forces” with the competition in order to stop a new entrant. Great Guitar could allow collaboration with another manufacturing company and therefore work together on