How information technology impacts industry structure?

Information technology ‘’I.T.’’ is the modern language/interface of any activities or functions. It is like a comparison between sending e-mails today and the hard copy post letters in the past.

Accordingly, the industry structure has changed a lot in order to match - in its internal functional processes – with the whole I.T. applications, which became many and huge.

This is also a dynamic process, which means that the structure and techniques of the industry will change again into another model in case that the I.T. models are developed or changed.

At the end, we can say that the modern techniques of all industrial applications had become depending more on being adapted with the I.T. interfaces and models more than being depending only on the mechanical or automatic processes.  

Information technology can alter each of the five competitive forces and, hence, industry attractiveness as well. The technology is unfreezing the structure of many industries, creating the need for change. For example:

Bargaining power of buyers and suppliers

·         Information technology increases the power of buyers in industries assembling purchased components. Automated bills of materials and vendor quotation files make it easier for buyers to evaluate sources of materials and make-or-buy decisions.

·         Information technology has had a particularly strong impact on bargaining relationships between suppliers and buyers since it affects the linkages between companies and their suppliers, channels, and buyers. Information systems that cross company lines are becoming common. In some cases, the boundaries of industries themselves have changed.

·         Many systems raise the costs of switching to a new partner because of the distribution and retraining required. These systems tend to tie companies more closely to their buyers and suppliers.

Threat of new entrants

·         Information technology requiring large investments in complex software have raised the barriers to entry.

·         Information technology is altering the relationship among scale, automation, and flexibility with potentially profound consequences. Large-scale production is no longer essential to achieve automation. As a result, entry barriers in a number of industries are falling.

Threat of substitutes

·         Flexible computer-aided design and manufacturing systems have influenced the threat of substitution in many industries by making it quicker, easier, and cheaper to incorporate enhanced features into products.

Rivalry among existing competitors

·         The automation of order processing and customer billing has increased rivalry in many distribution industries. The new technology raises fixed costs at the same time as it displaces people. As a result, distributors must often fight harder for incremental volume.

·         Automation no longer necessarily leads to inflexibility. Some cars manufacturers can build customized cars on the normal assembly line. Automation and flexibility are achieved simultaneously, a pairing that changes the pattern of rivalry among competitors.

·         The increasing flexibility in performing many value activities has triggered an avalanche of opportunities to customize and to serve small market niches. Computer-aided design capability not only reduces the cost of designing new products but also dramatically reduces the cost of modifying or adding features to existing products. The cost of tailoring products to market segments is falling, again affecting the pattern of industry rivalry.

While managers can use information technology to improve their industry structure, the technology also has the potential to destroy that structure. Information technology has made a number of professional service industries less attractive by reducing personal interaction and making service more of a commodity. Managers must look carefully at the structural implications of the information technology to realize its advantages or to be prepared for its consequences.

Hello,

as far as i can remember, IT helps to design more effective systems, define and integrate business processes from shop floor to enterprise and sterategic levels. better control on procurement, inventory, production and sales that results higher control over the costs, higher benefits, better competition and higher market share.