The Five Competitive Forces That Shape Strategy, Article Review Example

The increased information technology consumption over previous decades has been complexly and insistently integratedinto business processes. The increased use and dependence of IT within business practices has also resulted in increases in IT risks as well (Porter, 2008). IT is described as the probability of inadvertent circumstances inclusive of failures or inappropriate application of information technology threatening the accomplishment of the company’s objectives beyond the information technology department (Porter, 2008).

IT Risks to a Company’s Competitive Advantage

The risks associated with IT are concerned with the application, possession, adoption, involvement, and effect of information technology on operations. These are inclusive of practices related to information technology and circumstances that possess the potentiality of impacting the business. These risks present challenges in achieving the strategic objectives of the company and they can be categorized as;

Value enablement/ IT benefit-risk 

This is the risk associated with information technology and is related to the unexploited opportunities to the application and implementation of the particular information system. This is with respect to enhancement of the effectiveness and efficiency of operations and business processes or intended as a support service to new business enterprises.

Project delivery and information technology program risk

This is IT risk category related to the support of information technology to innovative and new business solutions particularly in the form of initiatives and projects. It is also associated with investment portfolio management risks.

Service delivery and information technology risk

This information technology risk is related to the entire aspects of the IT systems and services performances that bear potentiality in reduction or obliteration of the business’ value.

Therefore, these categories of risks present dimensions of information technology risk to the company that corresponds to the organizational-level objectives of IT and are inclusive of;

Availability risk; this IT risk is particular to the maintenance of the existing business operations and improving from interruptions.

Access risk; this is an information technology risk where the staff and customers have the necessary access to the facilities and data required and unauthorized personnel lack access.

Agility; this information technology risk is related to the implementation of innovative strategic programs inclusive of; completion of a major business process or operation, acquisition of a firm, and launch of new products and services.

Accuracy; A company, faces risks in information technology implementation during the provision of accurate, in time, and complete data that matches the necessities of the staff, management, customers, regulators, and suppliers.          

Areas IT Supports Competitive Advantage

Environment Evaluation

It is important critically to assess the applicants who manage and use the IT systems, the number of servers, and the type of information processed so as to effectively manage the risks. Therefore, it is necessary carefully to organize distinct business segments, demographics, product line, and the information center. Therefore, allowing analysts to monitor, audit the risks associated and providing appropriate compliance reports for the business (Porter, 2008).

Identify IT policies and risks

To effectively manage IT risks, an organization’s management requires identifying the particular risks associated with the information systems and procedures to manage them. To begin with, it is necessary for the organization to recognize the standard information technology operation policy measures. These are applied to protect crucial assets and data and the evaluations to ascertain their proper functioning (Porter, 2008). The sensitivity of the data protected and the probability of failure of control can be used to determine the risk of control of failure. On the other hand, other key risk indicators can be considered such as;

• System breaches and third party infiltration
• Limited staff with necessary qualifications
• Alterations causing disruptions in the production systems

Identify niches and test measures

It is important for the organization to gather information regarding security incident records, vulnerability scanners, and network change management systems. It is from the information collected that the management gets to recognize the gaps and apply a set of critical measures so as to maximize the efficiencies of operations.

Enhance mitigation

Application of risk scoring measures is required to optimize the implication of the work after numerous control tests. The determination of risk scores is through individual considerations including;

• The extent of exposure of the system to other systems including; accessing users, partner systems, and the internet
• The likelihood of failure of the systems during control tests with respect to past performance
• The extent of seriousness with regards to the protection and data privacy of the systems to customers, the business operations, shareholders, and partners.

After this deliberation, the management applies the risks scores and establish necessary priorities for the information technology services that achieves increased productivity and effective alleviation of the risks (Porter, 2008).

Regular monitoring and report

Effective management of the IT associated risks by managers necessitates continuous auditing, regulation, and reporting of the system’s operation (Porter, 2008). This is important since the risk and compliance organization leaders achieve the advantages of increased productivity and reduced costs much more than their industry peers. This is because continuous monitoring and reporting results in; minimal disruptions, minimal compliance deficiencies, and limited thefts (Porter, 2008).

IT disadvantage and mitigation steps

Despite the benefits of information technology in assisting ease of communication and convenience in business processes, numerous privacy concerns arise with increased application (Porter, 2008). These privacy concerns range from, email hacking and a signal interception which worries business managers since this increases the probability of unauthorized access to a company’s information by competitors. Therefore, this particular risk can be mitigated through alignment of the entire important operational, financial, and compliance risks so as to ensure the appropriate test plans, controls could be integrated in a prioritized tool for close observation and reporting. This bears the advantage of minimized breaches through efficient systems operation and increased focus on strategic initiatives the lead to enhanced business value (Porter, 2008).

Competitive Advantage of IT through Products

It is important to consider factors through which organizations gain a competitive advantage by the development of new services and products through differentiation of products and services from those of competitor firms and improvement of the existing products and services. Application of information technology to the production of goods and provision of services enhances efficiency (Porter, 2008). For instance, a car rental agency requires the use of information systems to deliver the data about the vehicles’ whereabouts and provision of destinations as part of the driving instructions hence a part product for the rental companies. On the other hand, the support with which IT provides to the business is achieved through incorporation of information technology to the schedules for the maintenance of the car which do not form part of the company’s core product (Porter, 2008). In addition, technology aids in maintaining customer databases through which trends on buyer behavior can be monitored and leveraged upon.

References

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 78-93.