The integration of information technology in organizations is giving new ways of doing business and they are aware that computers are tools for change in the execution of their activities, since they allow minimizing time, improving data integrity, avoiding redundancy in their data and generate information that meets the expectations of different users; that is why companies acquire hardware and software that allows them to work smarter.
As well as the previous ones, there are companies that are dedicated to selling the hardware and software that they need. Despite this, the definition of their business strategies has been oriented towards operational processes and has often neglected the competitive advantage that can be generated from studying the environment and competition.
The competitive advantage of business is the particular characterization of the strategies that a company or a sector has to increase its market share even when there are many competitors.
Michael Porter has raised five competitive forces to consider when conducting a sector analysis, which are described below:
A. Entry of new competitors
To the extent that businesses can be easily copied or imitated, they will be more vulnerable to attack by new investors.
B. Client's negotiating power
It is the customers who slow down the rise in prices by demanding differentiated or higher quality products or services and, in general, influence merchants through their tastes and preferences. As can be seen, an outstanding aspect is providing the customer with a better service, because it depends greatly on whether the companies remain competitive in the market.
C. Substitute Products
Substitute products or services are those that can displace others, without being exactly the same but offering the consumer an equivalent use to satisfy their needs.
D. Bargaining power of suppliers
Suppliers compete with each other to achieve better sales conditions with their customers, such as prices, services and quality. In this way, the sales and credit policies of suppliers have a direct impact within the framework of business competitiveness.
E. Intensity of rivalry
The rivalry arises because one or more of the competitors feel the pressure or see the opportunity to improve their position in the market. The most commonly used tactics are: Price competition, advertising war, introduction of new products, increases in customer service or in the guarantee of the products they offer.
The intensity of rivalry between competitors basically depends on three indicators:
- Level or degree of concentration. It occurs when there are few companies in the sector and one of them leads the market, making the others adapt to their conditions. Industry growth rate. The higher the growth rate of an industry, the lower the intensity of rivalry in the industry. Absence of costs to change suppliers. When product differentiation is low and customers do not have loyalty to a brand or supplier, it is the price that determines the purchase; on the other hand, when the products or services are specialized and the buyer's requirements imply high quality standards, the intensity among the direct suppliers will be greater.
A variety of competitive strategies can be developed to counter the five competitive forces outlined above. For example, companies may try to counter the bargaining power of customers and suppliers by developing unique business relationships with each other, conditioning them by creating "travel costs." Another strategy is the development of legal, financial or technological requirements that create barriers to enter new competitors or make substitution somewhat unattractive or uneconomical.
Another way that companies can combat threats from the five competitive forces is to implement five basic competitive strategies:
- Cost leadership strategy. Reduction of the costs of your products and services; helps customers and suppliers reduce their costs or increase those of their competitors. Differentiation strategy. Developing ways to differentiate your products or services from the competition, can mean a competitive advantage in certain segments or niches of a market. Innovation strategy. Finding new ways of doing business that may include marketing unique products and services or entering exclusive niche markets, radical changes in business processes, and the sale and distribution of products and services. Growth strategies. Significantly expand the availability of goods and services offered by a company, expand markets,diversify products and services. alliance strategy. Establish new links and business alliances with clients, suppliers, competitors, consultants and other companies. They may include mergers, acquisitions, joint ventures, formation of virtual companies or other marketing agreements.
The proper use of computer technology can provide companies with tools to help them improve their competitive strategy. You can have communication with suppliers and customers; You can create customer profiles and send them emails or newsletters about the products in which they are interested; promote new products; publish studies carried out on products and / or services; put barriers to the entry of commercial competitors; put up barriers to customer withdrawal; etc.
Recommended Bibliography:
Business Information Systems. Daniel Cohen. McGraw Hill
Management Information Systems. O'Brien. McGraw Hill
Competitive Strategy. Michael Porter
