Effects of Information Technology on Value Chain and Competitive Forces

Effects of Information Technology on Value Chain and Competitive Forces

Introduction

The competitive forces models and the value chain have wide applicability to the business management which does not only focus upon the effects of information technology. Nevertheless, literature about IT has gripped such models, which shows that information technology is pervasive throughout the research. The basis of this research is that the value chain and the competitive forces model proposed by Porter may serve as a source of test variable in the information technology- performance relationship in a firm.

Problem Statement

Today the rapid emergence of global value chains is unprecedented and related, amid geographic fragmentation increasingly marked production process. Technologies Information and communication technologies (ICT) have to split the value chain with the pace and extent of globalization, determining the location and activity of each link in optics cost reduction. The globalization of value chains is motivated by several factors. One of them is the desire to achieve efficiency gains, strengthening competition in domestic and international markets forcing companies become more efficient and reduce costs. However, despite the benefits that are expected, integration in a global value chain also leads companies to assume the costs and risks.

Thesis Statement

“Porter's value chain and competitive forces models can provide executives and IT decision makers with a framework for selecting the best IT investments and value chain services”.

Discussion

The value chain refers to the direct activities of a business such as operation or productions, intake of goods, marketing, distribution, services and other support activities such as human resources, infrastructure, procurement and technology. These activities are interrelated by different links which symbolizes the effects of one activity on the effectiveness of others (NetMBA, 2011).

According to Porter and Millar (1985), value chain enhances the role of information technology in competition. The value chain activities and the linkages among them are deeply embedded with information technology. Along with the physical tasks that are connected with a value chain activity, every activity also develops and uses information. Information technology also effects how an organization uses the linkages between the activities that can be internal as well as internal.

The new trends of value chain activities are marked by different factors. These factors include achieving efficiency, making domestic and international competition in markets strong which force companies become more efficient and to reduce their cost. Companies may achieve this by saucing the inputs from more efficient producers which might be located nay where around the world (Porter, 2008). On the other hand, by including new market entries and assessing the strategic assets which may help a company to operate in foreign location.

A model of five competitive forces which affect companies within an industry is proposed by Porter (1985). As shown in the figure, these competitive forces include the control of buyers, suppliers, rivals, substitutes and new entrants. The company must compete and coexist with its competitors for market share and revenues. Buyers put pressure by their capability to go towards their ...