Analysis of the IT Industry - Report Example

Five forces model: Five forces model was developed by Michael Porter in 1979 and is used for strategy development for firms as well as to conduct industry analysis. Reasons for profitability of the industries: The basic principle behind porter’s model is that profitability of an industry mainly arises when: 1. an industry has a good structure as per the five forces model 2. the industry has a competitive advantage than others Following are the reasons behind the success of most industries • Firm concentration • Economies of scale • Product differentiation • Established cost advantages The working of five forces model in the industry: “Customers, suppliers and competitors compete for value created by the industry which is limited by substitutes or alternative solutions to the underlying customer needs. The ideal industry is one where both suppliers and customers are weak, any new companies would find it very difficult to enter the market effectively and competitors focus on enlarging the total profits of the industry rather than competing away profits unnecessarily through unreasonable pricing because there are no viable substitutes.” http://businesscoaching.typepad.com/the_business_coaching_blo/2008/05/michael-porter.html The 5 forces of Porter’s Five forces model are as follows: There are five factors that determine the competitive power of an industry and they are as follows: 1. Threats from firms that have newly entered the markets 2. Intensity of the competitive rivalry 3. Threat of substitute product or service 4. Bargaining power of the customer 5. Bargaining power of suppliers Threat from new Firms: The profitability of the industry will never cease to attract new comers. While these new players entering the industry may lead to decrease in the profitability of the existing firms as the supply of the product increases along with the total market share. It will affect the price of the product, customer loyalty etc. The existing firms always try to create certain barriers to the entry of new firms There are several factors which act as barriers to entry, and these seem to have a competitive advantage for all firms existing in the industry. These factors are constraints for new firms to start their operation. Following are some of these constraints: 1. Entrance of new firms require higher capital investment 2. Economies of scale 3. Brand loyalty of customers 4. Cost advantage for existing firms due to experience curve 5. Intellectual property rights like-patent, license etc 6. Switching cost is high 7. Government policies and regulations 8. Scarcity of availability of key resources for existing firms 9. The firm’s reliability on us and customers as well as brand loyalty 10. Technical up gradation in the industry The new players always look for loop halls of existing firms for their entrance in the industry. Threat of substitutes: The threat of substitutes is high in case of IT industry. The threat from substitutes arises only if there is an alternative product which is being sold at lower prices as well as possess additional features than the existing ones. The threat from substitute products only when there is complimentary product, in case of marble industry tiles, wooden tiles should be used The threat from the substitutes is determined by the following factors- • Price and features of substitutes • Good customer relation • Taste and preference of customers during a particular time • Loyalty towards the brand • Switching cost for different customers From the above mentioned factors only one factor acts as a threat from substitutes, the switching cost for a consumer or dealer. For changing to the alternative customer pricing plan and incurring high switching cost. Rivalry between existing firms: The rivalry among existing firms refers to the competition between two or more firms. The internal rivalry among the existing firm is high in case of IT industry. The reason behind higher internal rivalry I because of the fact that: • In IT industry there are various producers with similar products and features • In case of IT industry there can be seen a high market growth rate • In this industry there are less barriers for exiting due to high investment It supports in the company’s competitive strategy: Innovative strategy: The innovative strategy in the IT industry is highly beneficial for a company in gaining the competitive advantage over other firms The various ways they can make use of are coming up with unique and innovative products or services in the market. The new innovations in the IT field have paved way for many the technological advancements in various organisations, and this helps to get the organisations to diminish the price of the products and the services and charge average affordable prices for the buyers. The organisations make use of enterprises systems, various management processes like the supply chain system and the value chain, customer relationship management enterprise resource planning etc This helps in improvising customer service as well as increasing the high reputation of the firm among other organisations. Information technology in the current era is an inevitable resource, where one cannot even begin to imagine about a life without them. The goal of these various systems is to make the most effective and efficient bondage between customers and the clients of these firms. They also contribute to the extended long term relationship between the customers and the clients. As a different strategy, the organisations try their level best to make their products different from that of competitors The Apple Inc for example accounts for a different identity in the manufacturing industry with the different and unique look each of its products has as well as the ease to handle and use them Risks in information technology: There are various risks associated with information technology in the organisations, and some of them include sharing of mail id and other such personal information on the net, when the employees share work related addresses in the public chat sites, they can be easily traced by the other companies which would entail in a lot of problems. The sharing of company information can affect the productivity, time taken for the completion of projects as well as the security of the company. The various kinds of replacement of various components is another risk for the system and the main aim of the same is to satisfy the customer requirements and to make the customers satisfied, and to update the performance as well as assure the proper usage of the resources. The consequences can help to increase the productivity profitability and other such quality of the system. The various disadvantages seen include the various threats in the analysis and the functioning of system, the vulnerability analysis etc. The vulnerability analysis and evaluation is an essential element of every significant movement under the Risk Management Framework (RMF). The RMF consists of certain steps, where under each step the company has to undergo vulnerability analysis and assessment. The six steps involved in vulnerability analysis help in the easy identification and evaluation of various vulnerabilities found in \ various steps where the identification is necessary “The instant access that hackers have to the latest tools and techniques demands that companies become more aggressive in defending the security of their networks. Conducting a network vulnerability assessment, a self-induced hack attack, identifies the network components and faults in policies, and procedures that expose a company to the damage caused by malicious network intruders”. http://books.google.co.in/books?id=UWCuIXNTEqgC&dq=vulnerability+assessment&hl=en&ei=QnGYToirKMbOrQf3yZGtCg&sa=X&oi=book_result&ct=book-thumbnail&resnum=2&ved=0CD0Q6wEwAQ A vulnerability is a characteristic or feature of a constituent element that can be broken by an outside or inside agent like a hacking agent or even a malware attack to break a safety policy or cause a harmful consequence in the software of the system. The working of the vulnerability tools: “Performing vulnerability assessment is the only one step in developing a vulnerability management framework,but it is a very important step, you can perform vulnerability assessment internally or externally”. (P no:4) http://books.google.co.in/books?id=a2VZ6Q3i100C&pg=PA66&dq=vulnerability+assessment+steps&hl=en&ei=iXSYTp-VLInKrAeVs7WVBA&sa=X&oi=book_result&ct=result&resnum=3&ved=0CD0Q6AEwAg#v=onepage&q=vulnerability%20assessment%20steps&f=false Vulnerability evaluation methods usually toil by trying to mechanize the steps regularly engaged in using vulnerabilities: they start by the “footprint” examination in order to establish their studies and findings about the software services. Concern ought to be taken when successively using the code adjacent to the various operational targets, as there may entail destructive consequences. Advantages: There are a lot of advantages and these are seen to help the business to be effective and efficient and to be in the peak of productivity and profitability. Storing Information: The storage information is highly beneficial as well as important for all companies According to experts this type of information maintains the details about vital resources, which a company can use for reference when needed and which has been stored years back as well as the interested authorities can retrieve any related information within fractions of seconds. The usage of IT security is also much advantageous in protecting the data from piracy and hacking. The automated processes help in increasing the company’s efficiency by making the efforts much easier and also by lessening the strength of staff in the organisation Read More