CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGES

• To survive, an organization must create competitive advantages.

- Competitive advantage - a product or services that place a greater value to customer than similar offering from a competitor.

- First mover advantage - occurs when an organization give impact to its market share by being first with a competitive advantages.

• Organizations watch their competitor through scanning.

- Environmental scanning - analysis of events and trends in the external environment to organization.

• Three common tools to analyze and develop competitive advantages:

- Porter 's Five Forces Model

- Porter 's three generic strategies

- Values Chain

 

FIVE FORCES MODEL-EVALUATING BUSINESS SEGMENTS

 

BUYER POWER

• High when buyers have many choices and low when their choices are limited.
• Ways to reduce buyer power by loyalty programs.

- Loyalty program - rewards customers based on the amount of business they do.
- Switching cost - costa that can make customer reluctant to switch to another product or services






























SUPPLIER POWER

• High when buyers have few choices and low when their choices are many.
• Supply chain-consists of all parties involved in producing of a product or raw materials.

• Organizations that are buying goods or services can create competitive advantages through B2B marketplaces.

-Business to business(B2B) marketplace-an Internet based service that brings many buyers and sellers.

• Two types B2B marketplaces.

-Private exchange-a single buyers post its needs and open the bidding to any supplier who interesting to bid.
-Reverse auction-an auction format in increasing lower bids for willing the supplier to desired products or services at increasingly lower price.

THREAT OF SUBSTITUTE PRODUCT OR SERVICES

• High when there are many alternative to a product or service and low when there are many alternative to choose.
• Switching cost-costs that are make customers reluctant to switch another product or services.

THREAT OF NEW ENTRANTS

• High when it is easy to new competitor to enter the market and low when there are barriers to entering a market.
• Entry barrier-the expect from customer about product or service feature and must be offered by entering new market to compete and survive.

 

RIVALRY AMONG EXISTING COMPETITORS

 

• High when competition are fierce and low when competition is more complacent.
• Although competition is always intense in some industries, every industry will increased competition for the overall trend.

THE THREE GENERIC STRATEGIES-creating a business focus.

• Organization usually follow one of the Porter's three generic strategies when entering new market.
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VALUE CREATION

• Once an organization choose its strategy, it can use this tools to determined the success or failure of the strategy.
• Business process-a standardized set of activities that accomplish a specific task.
• Value Chain-views an organization as a series of processes, which adds value to a product or services for each customer.

• The competitor advantages is to:

-Target high value.
-Target low value.
-Perform some combination.