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The Five Forces Model Of Evaluating Business Segments By Michael Porter

1411 words - 6 pages

Companies make decisions all the time. Sometimes if the company is a big one, then the decisions are usually big ones too. One of these large decisions is the choice of if a company should enter into a new business segment or not. There is a very useful theory by Michael Porter who developed the Five Forces Model of Evaluating Business Segments. (Batlzan,Detlor,Welsh 2012) In today’s business top managers need structure when making decisions and this helps, but they also need accurate and up to date information from all parts of the business process. From suppliers, logistics, competitors, the industry and of course customers there must be information available to help make those decisions and they use business information systems to help with this. If it is big business or small they can benefit from using information systems. (
This paper will focus on the details of the Michael Porter’s model and how information systems help in the five force process. These forces are buyer power, supplier power, threat of substitute products or services, threat of new entrants and rivalry among existing competitors. The concept of these forces is that they influence how managers make the big decision to enter into a new market. If the forces show that the situation is too negative then the company might make a good decision and not go into this market and save a lot of money and problems.
Buyer power means how many choices customers have a lot of choice where they are going to shop. If there are too many choices for buyers then they can just shop other places and competition might be very strong. Supplier power is also important. This means that if there are not enough suppliers then those small amount of suppliers can control the price the supply, on the other side if there are many suppliers than the company can shop around just like a customer. The next is threat of substitute products or services and this might look similar to buyer power but it means customers have choices to buy similar but different choices to what the company wants to enter the new market with. An example would be if I wanted to build a new camera part in my computer company but now people can buy cell phones with cameras now. The next part is threat of new entrants. This can be a problem if a company wants to enter a market without much competition or no competition but it could be easier for more to enter easily. The final part is the rivalry among existing competition, and how tough the competition is at that time in that market. This is a big factor to get into this segment. When you look at all these factors, they all have a lot of information to look at and it is this information that is very valuable to a company that wants to enter into a new market. To do this they need information systems to help them.
According to Julie Davoren (2014) she gives her opinion on three parts of information systems this is number two. “The long-term success of a company...

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