Past Year Question March 2012 : Part C,Question 2

The five forces in Porter's Five Forces Model are buyer power,supplier power,threat of substitute products or services,threat of new entrants and rivalry among existing companies.

Buyer power is high when buyers have many choices of whom to buy and will low when their choices are few.
To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors.
Best practices of IT-based Loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays)
Bargaining Power of Customers or Buyer power.Customers can grow large and powerful as a result of their market share.
Many choices of whom to buy from and low when comes to limited items as example is used loyalty programs (jusco card, tesco card,and being a members to get the discount)

Supplier power is high when buyers have few choices of whom to buy from low when their choices are many.
Best practices of IT to create competitive advantage as example B2B marketplace which private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids.

Threat of substitute products and services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose.
Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.
Best practices of IT.As example,Electronic product which have same function but different brands.
Threat of Substitutes is to the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.As example,electronic product which have same function but different brands.
Switching cost means costs can make customer reluctant to switch to another product or service.

Threat of new entrants is high when it is easy for new competitors to enter a market and is low when there are significant entry barriers to entering a market.
Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.
Best practices of IT.As example,new bank must offers online paying bills, acc monitoring to compete.
Many threats come from companies that do not yet exist or have a presence in a given industry or market.
The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.Example, new bank (online paying bills, acc monitoring).

Rivalry among existing companies is high when competition is fierce in a market and low when competition is more complacent.Best Practices of IT ,Wal-mart and its suppliers using IT-enabled system for communication and track product at aisles by effective tagging system.Reduce cost by using effective supply chain.Rivalry Among Existing Firms.
Existing competitors are not much of the threat typically each firm has found its "niche".
However, changes in management, ownership, or "the rules of the game" can give rise to serious threats to long term survival from existing firms.Example,the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt. (MAS & AIR ASIA).