One of the most useful, important, and enduring business strategic models was developed by Harvard professor Michael Porter in the 1970's. Michael Porter's five forces model provides organizations with a framework for industry analysis and strategy development based on a holistic understanding of the structural drivers of profitability. Good strategies help organizations anticipate and influence competition (and profitability/success) over time.

According to Porter, most strategist too narrowly define competition. Industry rivalry, customers, suppliers, potential entrants, and substitute products define an industry’s structure and shapes the nature of competitive interaction. The sum total of the competitive intensity from these forces determine the attractiveness of an industry.

Applying the Five Forces Model to Commitments in Internet Collateral and Providers (iTechnologies)

Businesses, organizations, governments, and even individuals are making huge resource commitments in Internet collateral such as Websites, social network media, online productivity applications, company intranets, and more. Understanding the competitive structure of Internet industries can lead to better long-term commitments in technology. In today's rapidly changing industries, using the five forces model can help defend against "tricks or trends" that can easily divert our attention, resources, and success. Organizations can use the five forces model to guide commitments in iTechnology by:

• Looking for companies that are competing where the forces are the weakest
• Organizations that exploit changes in the forces
• Competitors that are reshaping the forces in their favor

My Suppliers are My Competitors: Sustainability Versus Bargaining Power

When customers seek providers of iTechnology they need to commit to providers that will be able to sustain industry pressures for the next 10-30 years.  Given that history has consistently demonstrated that most industries are dominated by a few participants, it is important to correctly identify the few organizations that will be around for the long-term. Keep in mind that the value of your resource commitment is not in the technology, but your ability to add value to the technology.  As we all know, the cost of database software should pale in comparison to the cost of the time the software is used in an organization. A productive database is rich in value. 

The five forces model points out that successful providers will have more control over the bargaining process with customers than less successful providers. Realizing this, iTechnology customers should overcome the temptation to commit to organizations that are in an inferior negotiating position in the transaction. Let's consider the case when organizations are selecting a Web developer.  Established providers snub their noses at small projects and price-sensitive buyers. The buyers then move down to mid-size and small developers until they find a provider that can be dominated, intimidated, or controlled.  However, this probably is not a good strategy since these providers are weak competitors that are less likely to be around for the long-term. 

Conclusion

Organizations of every size are making huge resource commitments in Internet and social media providers. Critical to good decision making is the long-term viability of the commitment. The five forces model can be used to identify potential providers that will be around for the long-term. A good understanding of the competitive forces in iTechnology industries can help organizations avoid the pitfall of investing in providers that are in a weak long-term competitive position. This will enhance the value of the resource commitment and decrease the long-term cost.