Monday, 8 July 2013

chapter 2

Chapter 2 : Identifying Competitive Advantage

   What is competitive advantage ?

   ·         A product or service that an organization’s customers place a greater value on than similar offerings from a competitor.
·        Competitive advantage is temporary because competitors keep duplicate the strategy. Then, the company should start the new competitive advantages.
·         Michael Porter’s find forces model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

The Five Forces Model:
·         Buyer Power
ü  High – when buyers have many choices of whom to buy
ü  Low – when their choices are few
ü  To reduce buyer power, an organization must make it more attractive to buy from the company not from the competitors.
ü  Best practices of IT-based

                                                                            Supplier Power

                                             High – when buyers have few choices of whom to buy from.

                                                               Low – when their choices are many.

                                                     Best practice of IT to create competitive advantage.

Threat of Substitute products and services
       High – when there are many alternative to a product or service.
       Low – when there are few alternative from which to choose.
       Ideally, an organization would like to be on a market in which there are few substitute of their product or services.

Threat of new entrants

       High – when it is easy for new competitors to enter a market.

      Low – when there are significant entry barriers to entering the market.

      Entering barriers is a product or service feature that customers have come to expect from organization and must be offered by entering the organization to compete and survive.

                                                           Rivalry among existence competitors

                                                   High – when competition is fear in a market.

                                                    Low – when competition is more complacent.                                                                    
                                                      Reduce cost buy using effective supply chain.


1.       Cost leadership
-becoming a low cost producer in the industry allows the company to lower prices to customers.
-competitors with higher cost cannot afford to compete with the low cost leader on price
2.       Differentiation
-create competitive advantage by distinguishing their product on one or more features important to their customers.
-unique features or benefit may justify price differences or stimulate demand.
-Ex : i-care by Proton
3.       Focused strategy
-target to niche market.
-concentrates on either cost leadership or differentation

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