How Information Gives You Competitive Advantage
by Michael E. Porter, Victor E. Millar

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Book Reviews of How Information Gives You Competitive Advantage

Book Review: The impact of information technology on the value chain
Summary: 4 Stars

In this article the authors aim to help general managers respond to the challenges of the information revolution. The information revolution is affecting competition in three vital ways: (1) it changes industry; (2) it gives companies new ways to outperform their rivals; and (3) it spawns whole new businesses. The authors discuss the strategic significance of information: "Information technology is changing the way companies operate and affects the entire process by which companies create their products." It even reshapes the products themselves. These points are explained by using the value chain. The authors then go on to discuss how information technology changes the nature of competition, building the arguments on Porter's previous work (1980, Competitive Strategy; 1985, Competitive Advantage). "Information technology can alter each of the five competitive forces and, hence, industry attractiveness as well. ... The technology affects value activities themselves or allows companies to gain competitive advantage by exploiting changes in competitive scope." The information revolution has also given birth to completely new industries in three distinct ways: (1) it makes new businesses technologically feasible; (2) it can spawn new businesses by creating derived demand for new products); and (3) it creates new businesses within old ones. So how can senior executives take advantage of these opportunities? Porter and Millar provide five steps which companies can use for successful competition in the age of information. All of the points the authors make are complemented with clear examples, although somewhat dated now.

Although this article was published in the July-August 1985 issue of the Harvard Business Review it is still very relevant, especially with the introduction of the Internet. It explains clearly how information technology affects the value chain and how companies can take advantage of the new opportunities provided by it. I see Porter's 2001-article 'Strategy and the Internet' as a modern-day complement to this article, and taken together these two articles will provide managers and MBA-students with great insights into the strategic use of information technology/IT. The authors use simple US-English.

Summary of How Information Gives You Competitive Advantage

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