Final answer:
A company's IT infrastructure spending should be aligned with its business strategy, taking into account factors like market expansion, competitive intensity, and barriers to entry. The strategy should reflect the need to compete with giants in a 'winner-take-all' market or to innovate in markets with high entry barriers, while also being mindful of societal and environmental impacts.
Step-by-step explanation:
When evaluating how much a company should spend on IT infrastructure, a chief technology officer (CTO) should consider several factors, including the company's business strategy. The competitive forces model suggests that the level of investment in IT should align with the company's overall objectives and the role IT plays in providing a competitive edge. For instance, if a company aims to expand beyond its local geographic area to compete in national or international markets, as enabled by information and communications technology (ICT), it may need greater investment in IT to support this expansion. Conversely, companies facing 'winner-take-all' markets, where few large firms dominate, must invest in IT to build scale, improve management of widespread operations, and stay competitive against prominent players like Microsoft and Amazon. Ultimately, the CTO must assess the company's market structure, including competition intensity, market power, and barriers to entry, when deciding on IT investments.
For companies in markets with significant barriers to entry, like a web browser market, innovative strategies may include leveraging partnerships, focusing on niche segments, or employing aggressive marketing to differentiate the product and gain a foothold. Additionally, it's crucial to consider not only the economic implications of ICT but also the societal and environmental impacts, navigating the landscape through appropriate regulation, investment in human capital, and innovation encouragement as outlined in governments' roles.