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.

      

       THE THREE GENERICS STRATEGIES

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