Question

Q1. Define Porter's competitive forces model and explain how it works. Also, describe how information systems can support each of these competitive strategies and give examples. How the Internet has reshaped the competitive forces and competitive advantage Q2. What ethical, social, and political issues are raised by information systems? List and describe the key technological trends that heighten ethical concerns. (b) Differentiate between responsibility, accountability, and liability.

Answer 1

Answer 1 –

Definition of Porter’s Competitive Forces Model:

Threat of Entry Bargaining power of Suppliers Bargaining power of Buyers Industry rivalry Threat of Substitutes

• Porter’s competitive forces model is a tool that is used in the analysis of the five forces in an industry that determines the power of competition in an industry and its profitability level.
• Threat of Bargaining Power of Buyers – The buyer has the power to demand a lower price or higher product quality from the producer when their bargaining power is strong. Buyers have a strong power to bargain when:
  • Only a few buyers exist in the market for the goods/services
  • There are many substitutes for the product/services
  • Switching costs to other suppliers are low or negligible for the buyer.
• Threat of Rivalry among existing competitors -- In any industry, all the companies must compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when:
  • The count of competitors is high.
  • Growth of the industry is extremely slow.
  • Customer loyalty is low.
  • Products/services can be easily substituted.
• Threat of substitutes -- This force can be a threat when the buyer can easily find a substitute product with a good price or better quality. Also, this can be a threat when buyers can switch from one product or service to another with little cost.
• Threat of Bargaining power of suppliers -- Good bargaining gives suppliers the opportunity to sell raw materials at a higher price or of low quality. Suppliers have strong bargaining power when:
  • There are a supply and demand parity between the suppliers and buyers.
  • Suppliers have scarce / precious resources.
  • The cost of switching raw materials is exceptionally expensive for the buyer.
• Threat of new entrants -- This force determines how easy or difficult it is to enter any given industry. Threat of new entrants is high when:
  • The amount of capital needed to enter a market is less;
  • Current companies can do little to retaliate;
  • Customer loyalty is negligible;
  • Products and services offered are almost identical.
• Effect of Information Systems on Porter’s Competitive Forces Model –
  • Bargaining Power of Buyers
    • With the help of information technology, buyers are more well informed about the companies’ products and services.
    • Organizations can better understand what the consumer wants and provide or produce the required services and goods.
  • Rivalry Among Existing Competitors
    • In certain industries, e.g. Service industry, the pricing of goods and services are almost equal.
    • Whenever a company adopts a form of technology that reduces the time taken to service the client, almost immediately the other companies adopt the same to remain competitive.
    • Therefore, we can say that technology has increased the level of competition among the companies in the same industry.
  • Threat of substitutes
    • Traditional manufacturing systems will not be able to meet the demands for high-quality products with a substantial reduction in the manufacturing time.
    • Thus, using information technology organizations can manufacture new products within a shorter time and reduce the threat of substitute.

• Threat of Bargaining Power of Suppliers
  • With information available more easily, organizations can check the pricing more effectively now compared to the industries in the past.
  • Selection of the right vendor is now a seamless process with the introduction of IT.
• Threat of new entrants
  • The barrier to enter new industries has significantly increased with the introduction of information technology.
  • With more and more industries trusting cloud technology, manual intervention has drastically reduced.
  • In order to be trained and upskilled to keep up with these technologies, newer companies need to invest a larger potion in training and development.

How the internet reshaped the competitive forces and competitive advantage:

• If you analyse some industries of the past, the Internet has nearly destroyed some of them, especially industries in which a lot of manual work and human labour existed.
• However, on the plus side, the Internet has also created new markets and laid the foundation for thousands of new businesses.
• Due to the Internet, competition has become much more intense.
• The technology is mostly based on universal standards that any company can use which makes it easy for rivals to compete on price.
• Also, as the information is available to everyone, the Internet improves the bargaining power of customers, as they can quickly find the lowest-cost provider on the internet.

Answer 2:

Ethical, Social & Political Issues raised by Information Systems:

• Information technology is introducing changes for which laws and rules of acceptable conduct have not yet been developed, as this sphere of technology is very robust and changes frequently.
• Increasing computing power, storage, and networking capabilities expand the reach of the individual and an organization. It also intensifies their actions and impacts.
• The ease with which information is now communicated, copied, and manipulated online creates new issues for the privacy and intellectual property protection.
• The main ethical, social, and political issues raised by information systems are related to information rights and obligations, property rights and obligations, accountability and control, system quality, and quality of life.

List and describe the key tech trends the heighten ethical concerns:

• Doubling of Computer Power – Doubling of computer power every 18 months has made it possible for most organizations to use information systems for core production processes. As a result, there is a huge dependence on systems and the vulnerability for system errors and poor data quality have increased.
• Declining storage costs – Improvement in data storage and rapidly reducing storage costs are responsible for multiplying online databases that are maintained by private and public organizations. These can violate individual data privacy.
• Data analysis techniques – Advancement in the analysis for large datasets are a tech concern because companies and government agencies can find detailed personal information about individuals, which can be used to manipulate the individual. With contemporary data management companies can assemble more pieces of information than in the past.

Difference between responsibility, accountability and liability:

Responsibility This means that the individual accepts the potential costs, duties, and obligations for the decisions they make. Accountability It is a feature of systems and social institutions and means that mechanisms are in place to determine who took responsible action, and who is responsible. Liability It is a feature of political systems in which a body of laws is in place that permits individuals to recover the damages done to them by other actors, systems, or organizations