Information Systems in Organizations - Principles of Information Systems - page 60

committee. In that capacity, I participate in all of the key business conversations/decisions
that impact the company strategy and the technology strategy.” 34 In his book Good to
Great, Jim Collins outlines how technology can be used to accelerate companies to great-
ness. 35 Table 2.4 shows how a few companies accomplished this move. Ultimately, it is not
how much a company spends on information systems but how it makes and manages in-
vestments in technology. Companies can spend less and get more value.

Table 2.4

Company Business Competitive Use of Information Systems

How Some Companies Used
Technology to Move from Good
to Great
(Source: Data from Jim Collins,
Good to Great, Harper Collins
Books, 2001, p. 300.)

Circuit City Consumer electronics Developed sophisticated sales and inventory-control

systems to deliver a consistent experience to customers

Gillette Shaving products Developed advanced computerized manufacturing

systems to produce high-quality products at low cost

Walgreens Drug and convenience stores Developed satellite communications systems to link

local stores to centralized computer systems

Wells Fargo

Financial services Developed 24-hour banking, ATMs, investments, and

increased customer service using information systems

Factors That Lead Firms to Seek Competitive Advantage
A number of factors can lead to attaining a competitive advantage. Michael Porter, a promi-
nent management theorist, suggested a now widely accepted competitive forces model, also
called the five-forces model . The five forces include (1) the rivalry among existing competi-
tors, (2) the threat of new entrants, (3) the threat of substitute products and services, (4) the
bargaining power of buyers, and (5) the bargaining power of suppliers. The more these forces
combine in any instance, the more likely firms will seek competitive advantage and the more
dramatic the results of such an advantage will be.

five-forces model
A widely accepted model that
identifies five key factors that can
lead to attainment of competitive
advantage, including (1) the rivalry
among existing competitors, (2) the
threat of new entrants, (3) the threat
of substitute products and services,
(4) the bargaining power of buyers,
and (5) the bargaining power of
suppliers.

Rivalry Among Existing Competitors
Typically, highly competitive industries are characterized by high fixed costs of entering or
leaving the industry, low degrees of product differentiation, and many competitors. Although
all firms are rivals with their competitors, industries with stronger rivalries tend to have more
firms seeking competitive advantage. To gain an advantage over competitors, companies
constantly analyze how they use their resources and assets. This resource-based view is an
approach to acquiring and controlling assets or resources that can help the company achieve
a competitive advantage. For example, a transportation company might decide to invest in
radio-frequency technology to tag and trace products as they move from one location to
another.

Threat of New Entrants
A threat appears when entry and exit costs to an industry are low and the technology needed
to start and maintain a business is commonly available. For example, a small restaurant is
threatened by new competitors.
Owners of small restaurants do
not require millions of dollars to
start the business, food costs do
not decline substantially for large
volumes, and food processing
and preparation equipment is
easily available. When the threat
of new market entrants is high,
the desire to seek and maintain
competitive advantage to dis-
suade new entrants is also usually
high.

In the restaurant industry, competi-
tion is fierce because entry costs are
low. Therefore, a small restaurant
that enters the market can be a
threat to existing restaurants.
(Source: © Sergio Pitamitz/Getty
Images.)