Information systems, through the availability of new technology, create new substitutions frequently leading to a lack of price control and lower profit margins (K. Laudon & J. Laudon, 2014). A solution to this is product differentiation; Managers can use information systems to gain information to lead to product differentiation; market research through social media or online chatting can be undertaken to understand what customers want, what they are looking for, and what the trend is (A. Booth, R. Roberts & J. Sikes, Summer 2011). Customer relationship management systems and database technology can also be used to identify customers’ needs. This is however reflected on the price and clients have to be prepared to pay for the extra resources used by the management to produce differentiated products hence going against the cost leadership strategy suggested by Porter.
Two other threats mentioned in Porter’s five forces are power of buyers and power of suppliers. The internet is a great tool for customers and even management to compare prices and products. A number of websites are specializing in conducting comparisons of prices from various sites; An example is Trivago a metasearch engine comparing hotel prices from over two hundred booking sites. (www.trivago.com). Information systems can be used to create and strengthen relationships with suppliers and customers through application, and example is virtual organizations and inter-organizational …show more content…
This will help managers to extract the most accurate and up-to-date date by a click of a button which is vital when it comes to planning strategy, organizing, leading, controlling and for decision making (Boddy, 2012).
This contrasts with the manual system. Manual systems do not require any skilled employee to maintain, however it requires a number of employees to gather, find and collate the data. Such systems were also less costly to set up, upon saying so, since they are not as efficient as Information systems, in the long run these costs would be justified by the efficiency of the system. Information systems required disk space which keeps huge and cheap memory unlike the large storage space needed to archive for manual systems.
Information systems do have certain limitations; if it does not function well it will affect the running of the business this may result in wrong decision being taken, customer dissatisfaction and so on. This will required extra costs to higher specialists to fix it. Unprotected Information systems are also vulnerable to hackers and security breaches