Michael porter competitive model will provide an indispensable basis in evaluating the company’s competitive position. Application of this model to Giordano International Limited will help to represent complex concepts in relatively easily accessible formats. This model is also known as “five forces model”. This theory derives a correlation between competitors within a given industry, suppliers, potential competitors, buyers and alternative solutions to the problem being addressed. This is useful, because it will help the management of Giordano International Limited to understand both the strength of their current competitive position, and the strength of a position they are considering moving into. This model will therefore be a vital tool in comprehending the dynamics of competitive structure in the retail industry thus helping Giordano International Limited to rise above competitors and run profitability. This model consists of five fundamental competitive forces. These forces include (Barbara et.al 2006):
- Barriers to entry: - New entrants to an industry can raise the intensity of competition, thereby reducing its attractiveness. The threat of new entrants basically depends on the barriers to entry. This can be caused by economies of scale, capital requirements, switching costs, access to distribution channels, government policy, absolute cost advantages, scarcity of resources, high fixed costs, retaliation by incumbents, product differentiation and other cost advantages not related to the economies of scale. Proper evaluation of this force will be vital in cases where this company may want to venture into a new product in which there are already other players.
- Threat of substitutes: - The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. This depends on: buyer switching cost, relative price performance of substitutes, technology change and product innovation, fad and fashion, relative quality of substitute and buyer inclination to substitute. Therefore this requires that Giordano International Limited to put in place strategies that will lift their merchandise above the possible substitutes from the competitors.
- Bargaining power of buyers: this can be influenced by the following- bargaining leverage, buyer volume, buyer information, price sensitivity, brand identity, product differentiation, substitutes available and buyers incentives.
- Bargaining power of suppliers: the cost of items bought from suppliers materials, components) can have a major impact on a company's profitability. If suppliers have high bargaining power over a company, then in theory the company's industry is less attractive. Bargaining power of the suppliers depend on the following: Supplier concentration, importance of volume to supplier, differentiation of inputs, impact of inputs on cost or differentiation, switching costs of firms in the industry, presence of substitute inputs, threat of forward integration, and cost relative to total purchases in industry.
- Rivalry among the existing players: this can arise from the following: industry concentration, fixed costs/value added, industry growth, intermittent overcapacity, product differences, switching costs, brand identity, diversity of rivals, corporate stakes
Information Systems have become vital for helping organizations deal with transformations in the global economies and the business enterprise. Information Systems offer firms with communication and analytical tools for conducting trade and managing business on a global level. Information Systems make it possible for businesses to implement flatter, more decentralized structures and flexible arrangements of employees and management. Adopting appropriate information systems will help Giordano International Limited to effectively manage its 1600 stores in a decentralized manner. Use of information system strategy will help this organization to become more competitive and efficient by transforming itself into a digital firm where nearly all core business processes and relationships with customers, suppliers, and employees are digitally enabled (Porter and Millar 1985).
There are various management challenges in building and using Information Systems. The first is designing systems that are competitive and efficient and that will overshadow competitors. The second is understanding the system requirements of the global business environment as in the case of Giordano International Limited which has over 30 markets in Asian-pacific and Middle East region. The third is building information architecture and IT infrastructure that supports the organizations goals. Therefore this requires that for Giordano International Limited should come up with a working information system in which the objectives of the organization should be put into consideration. The fourth is determining the business value of Information Systems and the fifth is designing systems that people can control, understand, and use in a socially and ethically responsible manner (Barbara et.al 2006).
Porter’s competitive model is industry-related, assessing the position of a company in its industry. Giordano International Limited can use the model for competitive analysis, to suggest specific actions. In most cases such actions involve the use of IT and information systems. With Porter’s %uFB01ve forces model and various competitive strategies in mind, the model can be employed to help the company rise above the competitors. To deal with these competitive forces, Giordano International Limited can employ the following strategies (Barbara et.al 2006):
- List the players in each competitive force- An illustration of a competitive threat to Giordano International Limited is online shopping, which may be offered by retailers (electronic retailers). For instance, several online merchants have started to sell cloth Apparel.
- Relate the major determinants of each competitive force to each player in the market- For example, Giordano International Limited can develop an efficient online shopping, through which they can check the switching cost for the buyers, the buyers’ propensity to substitute, and the convenience advantage of online shopping.
- Devise a strategy with which Giordano International Limited defend itself against the competitive forces, based on the specific players and the determinants. For example, to counter online shopping, Giordano International Limited can provide an interactive online shopping model that is efficient, hand out free samples of products, and recognize frequent shoppers personally.
- Look for supportive information technologies- An illustration of this step for online shopping is a technology for managing frequent shoppers. Giordano International Limited can develop a gigantic database, data-mining techniques, smart cards, and decision support capabilities to analyze shoppers’ activities accurately and to act competitively in response. Giordano International Limited can also use IT extensively both to defend itself against the competition and to create innovative services and cost reduction, especially along its supply chain.
- Competitive intelligence-incorporating IT tools into operations of this organization will provides competitive (business) intelligence by collecting and analyzing information about products, markets, competitors, and environmental changes. This will help the company to position itself above its competitors.
- Time strategy- this requires one to treat time as a resource, Giordano International Limited should manage it and use it to the firm’s advantage. One of the driving forces behind time as a competitive strategy is the call for for firms to be instantly responsive to customers, markets, and changing market conditions. A second factor is the time-to-market race. By introducing innovative and effective information systems or using IT to provide exceptional service, companies can create barriers to entry from new entrants.
- Links with business partners: IT links a company with its business partners effectively and efficiently. For example, if this company adopts effective Global Distribution Network incorporated with appropriate information systems will allow it to connect with customers and in the process it will be able to broaden its marketing range.
- Customer-orientation strategy- Giordano International Limited should concentrate on making customers happy. Strong competition and the realization that the customer is the most vital component in any business is the basis of this strategy. To this effect, the company needs to develop appropriate information systems that are in line with preferences of the customers. For instance Web-based systems that support customer relationship management are especially effectual in this area because they can provide a personalized, one-to-one relationship with each customer.
- Operational effectiveness strategy- incorporation of appropriate information systems into various operations in the organization willimprove the manner in which internal business processes are executed so that a firm performs similar activities better than rivals. Such improvements increase employee and customer satisfaction, quality, and productivity while decreasing time to market.
Information has emerged as an driving force of integration and the enabler of new competitiveness for today’s enterprise in the global marketplace and because strategic information systems supports or shapes competitive strategies, the concepts of information systems is so significant, IT can be used to support a variety of strategic objectives, including links with business partners, acquiring competitive intelligence, and others.