Info Tech project

JustportersandZara-Example.ppt

IT600 IT Management

2004B-02

Porter’s 5 forces

Five competitive forces with potential

strategic use of information resources

Application of five competitive forces model.

Competitive Force	IT Influence on Competitive Force
Threat of New Entrants	Can be lowered if there are barriers to entry. Sometimes IS can be used to create barriers to entry
Bargaining Power of Buyers	Can be high if it’s easy to switch. Switching costs are increased by giving buyers things they value in exchange such as lower costs, effort, or time; or useful information
Bargaining Power of Suppliers	Strongest when there are few firms to choose from, quality of inputs is crucial, or the volume of purchases is insignificant to the supplier
Threat of Substitute Products	Depends on buyers’ willingness to substitute and the level of switching costs buyer’s face
Industrial Competitors	Rivalry is high when it is expensive to leave an industry, the industry’s growth rate is declining, or products have lost differentiation

Application of five competitive forces model.

Zara, a global retail and apparel manufacturer based in Spain that has successfully implemented this idea by having a continuous flow of new products that are typically limited in supply. Zara has created a system that draws its clientele into its stores, on average, 17 times per year as compared to 4 times per year for most stores. This is made possible by aligning its IS model with its business model. The conclusion is that a company can achieve substantial advantage over its competitors through innovative use of its information resources.

Application of five competitive forces – Zara example

Competitive Force	IT Influence on Competitive Force
Threat of New Entrants	Zara supports its tightly knit group of designers, market specialists, production managers, and planners. These relationships take time. Rich customer information in its database would take time to develop.
Bargaining Power of Buyers	Recently, Zara has created a laser-created database of sizes for 10,000 “real” women volunteers. New products will be more likely to fit.
Bargaining Power of Suppliers	Computer-controlled cutting machine can cut 1,000 layers at a time. A large number of sewers are available.
Threat of Substitute Products	IT helps Zara offer extremely fashionable clothing that would last 10 wears. The result is trendy clothes at reasonable prices, making substitutes difficult
Industrial Competitors	Zara tracks breaking trends and customer preferences. The result is the highest sales per square foot in the industry without much advertising, low inventories, only 10% of inventory unsold, new products from idea to shelves in 15 days, and manufacturing efficiencies