What does it mean when a company has a competitive advantage? What are the factors that play into
it? While there are entire courses and many different opinions on this topic, let’s go with one of the
most accepted definitions, developed by Michael Porter in his book Competitive Advantage: Creating and
Sustaining Superior Performance. A company is said to have a competitive advantage over its rivals when
it is able to sustain profits that exceed average for the industry. According to Porter, there are two primary
methods for obtaining competitive advantage: cost advantage and differentiation advantage. So the question
becomes: how can information technology be a factor in one or both of these methods? In the sections
below we will explore this question using two of Porter’s analysis tools: the value chain and the five forces
model. We will also use Porter’s analysis in his 2001 article “Strategy and the Internet,” which examines
the impact of the Internet on business strategy and competitive advantage, to shed further light on the role
of information technology in competitive advantage.