Porters Strategy of the Internet - Assignment Example

Analysis and Evaluation of Porter’s Strategy and the Internet Task Strategic Positioning Support Porter’s journal article attempts to convincinglypresent the view that the internet is a key tool in the implementation of a firm’s strategic management. There are two prominent themes in the article namely strategy and strategic positioning in the context of internet usage in the modern organization (Kim et al, 2006, p983). Controversy should not arise on whether the internet contributes to strategy in the information age’s business (Howry, 2003, p1). With strategic positioning, internet can be incorporated as part of the organizations’ strategy without any adverse impact. According to Porter, the internet should not be viewed as a hindrance to business, rather it should be seen as part and parcel of the whole business package. Therefore Porter’s stance in supporting strategic positioning in an organization’s strategy is manifested in a myriad ways in his article (Porter, 1996, p61). The fact that the author includes strategic positioning in a list of other strong moves to achieve competitive advantage in the market is evidence of how the opinion held is in the affirmative. As illustrated in the task immediately below, reasons for strategic positioning are well sought to support the opportunity they present to management. Porter supports strategic positioning from different options which are consequently outweighed and eliminated. Task 2: Central Arguments Central arguments of Porters view support the fact that the imminent internet spread to all business settings must be embraced for the advantages it presents to modern business (Stafford, 2005, p41). These arguments focus on how companies can make use of internet to create true economic value , which he describes as the “gap between price and cost, and it is reliably measured only to by sustained profitability” (Porter, 2001, p65). Porter presents internet based companies as informed entities that can enjoy the unexploited benefits of internet usage (Stretch, 2003, p134). Porter’s five points analysis determine the impact of structure to the needed response in the internet age (Porter, 2001, p5; Stretch, 2003, p133). Internet scenario in determining the competitive options that a company has will therefore follow such factors as; competitive rivalry, industry entry barriers for competitors, threat of substitutability of products and suppliers and buyers bargaining power. Creation of a winning market positioning based on the information of the current market features must apply a strategic approach. Another clearly articulated item in Porter’s work is how a company can establish a competitive advantage over rivals without encountering difficulty in integrating internet systems. The author systematically presents approaches recommended for the tackling of the delicate issue that sustainable competitive advantage is. Integrating divergent theoretical approaches avails options for intervention that management teams need in the dealing with internet intricacies (Brews, 2003, p34). For instance, Porter (2001, p68) addresses this issue by offering two alternatives that can either be used separately or together. On one hand, the use of operation cost reduction method may be introduced while a premium price mechanism on the other hand may come in handy. Further to these root options, the author presents well articulated options for dealing with cost and price interventions through operational effectiveness on one hand while strategic positioning is given ion the other hand. Besides mere statements of options, Porter takes the responsibility to offer the best option which in his opinion would suit a competitive market in the context of internet usage. He says that the most efficient way of ensuring that a company maintains its competitive advantage is by utilizing the aspects of strategic positioning. Incidentally, Porter isolates strategic positioning whose enormous opportunity remains unexploited. He argues that companies need to integrate Internet into their operations so as to make it impossible for competitors to use strategies similar to the company’s. Porter concludes by emphatically stating that Internet should be seen as a complement to rather than an inhibitor of a company’s business operations. He says that “only by integrating the internet into overall strategy with this powerful new technology become an equally powerful force for competitive advantage” (Porter, 2003, p. 78). Task 3: Criticisms Criticism raised over Porter’s view on internet in business mainly touches on the threat it presents to old strategy that seems to work well (Porter, 2001, p64). Howry (2003, p1) indicates that another criticism raised over internet use is the apparent leveling effect made to established routines in a company. Companies therefore fear that introduction of new operation systems under internet regime would tamper with their progress causing reduced revenues and sustainable advantage. According to the author, pioneers of internet usage had to cope with distorted signals regarding their markets. Curiosity sales which are not sustainable figures to be relied on are another cause for concern for internet usage, particularly for marketing purposes (Porter, 2003, p65). Alternatively, it has been a huge setback to revenue measurement in that stock as a means of payment as well as difficulty in demonstrating viability despite amassing of capital. Porter therefore presents strong views from different perspectives on the reasons why fears may be raised over reliance on internet as integral strategy tool. Costs and revenue appear to be vital uncertainty zones in internet business which demand extra caution (Eonsoo, Nam and Stimpert, 2004, p39). Task 4: Arguments Countered According to Porter’s understanding, management must take internet use as a complement to established systems to counter competition (Howry, 2003, p1). To counter arguments of applicability of internet in strategic management, Porter postulates the four point framework (Chang, Kichan and Mo, 2004, p163). Competitive advantages that internet based firms have over traditional way of doing business can be used to clear doubts over the arguments raised. Cost leadership for instance can be used to position the firm in a better operation level as one of the four frameworks. The other three frameworks identified by Porter include; market differentiation that narrows down to specific nature of the market, innovation differentiation that deals with the use of appropriate technology for specific business practices as well as market focus that dissects specific market for useful strategic detail. To further quell arguments against strategy in context of internet usage in business, Porter postulates six principles of strategic positioning that ought to be followed (Porter, 2001, p12). The author identifies the basic tools that equip companies with relevant skills that are deemed applicable in different perspectives on strategy, including internet perspective. Besides, Porter finds an answer to introduction of internet solutions to existing strategy formulation by illustrating how compatible it can be with any working system. Integration of internet solutions can solve the glaring complexity issues feared to render existing strategy obsolete. Understanding a company’s environment issues enables the management to enjoy the benefits of strategic positioning which is the key in a competitive business arena (Christensen and Montgomery, 1981, p328). According to Hambrick (1983, p10), strategy formulation must take consideration of the factors in the operation environment of the company. Similar environment issues are presented by Lenz (1980, p209), to the effect that strategy works if supported by complete understanding of the factors affecting operations. Porter particularly isolates one important advantage that strategy under internet regime enjoys; difficulty for being competitively replicated by rivals. Bibliography Barney, J. (1991) Firm resources and sustained competitive advantage. Journal of Management, vol. 17 no. 1 pp. 99-121 Brews, P. J. (2003) Star Trek strategy: real strategy at work. Business Strategy Review. vol. 14 no. 3 pp. 34-43 Chang, K. E., Kichan, N., & Mo, K. C. (2004) An examination of Porter’s competitive strategies in electrical virtual markets: a comparison of two on-line business models. International Journal of electronic commerce. Vol. 9 no. 1 pp. 163-180 Christensen, H. K. & Montgomery, C. (1981) Corporate economic performance: diversification strategy versus market structure, strategic Management Journal, vol. 2 pp. 327-343 Eonsoo, K., (2004) Testing the applicability of Porter’s generic strategies in the digital age: a study of the Korean cyber malls. Journal of Business Strategies, vol. 21 no. 1 pp. 19-45 Hambrick, D. L., (1983) Some test of the effectiveness and functional attribute of Miles & Snow’s strategic types. Academy of Management Journal, vol. 26 pp. 5-26 Hamel, G. & Prahalad, C. K. (1990) The core competence of the corporation, Harvard Business Review. May - June. pp. 79-91 Howry, E. (2003) Summary: Porter M. E. 2001 Strategy and the internet. [online] Available from: [accessed 3 March 2011] Kim, Y. J., Koo, C., Nam, K. & Song, J. (2006) Do e-business strategy matter? The antecedents and relationship with firm performance. Information Systems Front, vol. 9 pp.283-296 Lenz, R. I. (1980) Environment, strategy, organization structure and performance: Patterns in one industry, Strategic Management Journal, vol. 1 pp. 209-226 Pisano, G. Teece, D. J. & Shuen, A. (1997) Dynamic capabilities and strategic management. Strategic Management Journal, vol. 18 no. 7 pp 509-533. Pitt, L. (2001) Total e-clipse: 5 new forces for strategy in the digital age, Journal of General Management. vol. 26 no. 4 pp. 1-15 Porter, M. E. (1996) What is strategy, Harvard Business Review Nov-Dec. pp 61 -78 Porter, M. E. (2001) Strategy and the internet. [online] Available from: [accessed 3 March 2011] Stafford, C. S. (2005) Future e-business models and strategies for managers. Futurics, vol. 29 no. 1/2 pp. 41-46 Stretch, R. T. B. (2003) Porter and the internet: an empirical assessment of Porter’s strategic thinking as applied to online strategies for pet supply stores in the San Diego, CA Metropolitan Area. Journal of Applied Management and Entrepreneurship, vol. 8 no. 3 pp. 133-150 Read More