The Five Forces Model of Evaluating Business Segments by Michael Porter

The Five Forces Model of Evaluating Business Segments by Michael Porter

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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 th...


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3. Davoren (2014), The Three Fundamental Roles of Information Systems in Business, Demand Media; retrieved from http://smallbusiness.chron.com/three-fundamental-roles-information-systems-business-23681.html
4. Reiner K, Cegielski C (2011). Introduction to Information Systems, Supporting and Transforming Businesses (3rd ed) Maine, United States. John Wiley and Sons Inc.
5. Lundberg A.(2002), Wal-Mart:IT Inside the World’s Biggest Company, CIO.com
Retrieved from http://www.cio.com/article/31174/Wal_Mart_IT_Inside_the_World_s_Biggest_Company
6. O’leary C, Rao S, Chad P (2004)Improving customer relationship management through database/Internet marketing: A theory-building action research project; European Journal of Marketing p.338-354 Retrieved from: http://search.proquest.com.libproxy.cbu.ca:2048/business/docview/237027147/6ECC17A4C6A34BADPQ/1?accountid=9874



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