Threat of Substitute Products

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Threat of Substitute Products

Threat of Substitute Products

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Each of the competitive forces identified by Porter’s model is acting on firms at all times, but perhaps to a greater or lesser degree. There are forces from potential new entrants, buyers, sellers, substitutes, and competitors at all times, but their threat varies. Consider Zara, the case discussed in at the beginning of this chapter. See Figure 2.4 for a summary of these five forces working simultaneously at the retailer and manufacturer.

General managers can use the five competitive forces model to identify the key forces currently affecting compe- tition, to recognize uses of information resources to influence forces, and to consider likely changes in these forces

FIGURE 2.4 Application of five competitive forces model for Zara.

Competitive Force IT Influence on Competitive Force

Threat of New Entrant Zara’s IT supports its tightly knit group of designers, market specialists, production managers, and production planners. New entrants are unlikely to be able to provide IT to support such relationships that have been built over time at Zara. Further, it has a rich information repository about customers that would be hard to replicate.

Bargaining Power of Buyers Recently, Zara has employed laser technology to measure 10,000 women volunteers so that it can add the measurements of “real” customers into its information repositories. This means that the new products will be more likely to fit Zara customers.

Bargaining Power of Suppliers Its computer‐controlled cutting machine cuts up to 1,000 layers at a time. A large number of sellers are available for the simple task of sewing the pieces together. Zara has great flexibility in choosing the sewing companies.

Industry Competitors Zara tracks breaking trends and focuses on meeting customer preferences for trendy, low‐cost fashion. The result is the highest sales per square foot in its industry, virtually no advertising, only 10% of stock remaining unsold, very low inventory levels, new products offered in 15 days from idea to shelves, and extremely efficient manufacturing and distribution operations.

Threat of Substitute Products IT helps Zara offer extremely fashionable lines that are expected to last for approximately 10 wears. IT enables Zara to offer trendy, appealing apparel at hard‐to‐beat prices, making substitutes difficult.

c02.indd 40 11/26/2015 6:20:49 PM
41How Can Information Resources Be Used Strategically?

over time.

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