Chapter Two – part 2. Analyzing a Company’s External Environment. Five-Forces Model of Competition. Five-Forces Model of Competition. Porter’s competitive forces model.
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The existence of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business. Barriers to entry benefit existing companies already operating in an industry because they protect an established company's revenues and profits from being whittled away by new competitors.
Barriers to entry can exist as a result of government intervention (industry regulation, legislative limitations on new firms, special tax benefits to existing firms, etc.), or they can occur naturally within the business world.
Some naturally occurring barriers to entry could be technological patents or patents on business processes, a strong brand identity, strong customer loyalty or high customer switching costs.
Use information system to enable a specific market focus and serve this narrow target market better than competitors.
Information systems support this strategy by producing and analyzing data for finely tuned sales and marketing techniques.
Information systems enable companies to analyze customer buying patterns, taste and preferences closely so that they efficiently pitch advertising and marketing campaigns to smaller and smaller target markets.
E.g. Hilton Hotels’ OnQ system analyzes detailed data collected on active guest’s profitability. – give privileges.