CHAPTER 2: IDENTIFYING COMPETITIVE ADVANTAGE
1. What is competitive advantage ?
A product or service than an organization's customers place a greater value on than similar offerings from a competitor.
Unfortunately, CA is temporary because competitors keep duplicate the strategy.
Then, the company should start the new competitive advantage.
A product or service than an organization's customers place a greater value on than similar offerings from a competitor.
Unfortunately, CA is temporary because competitors keep duplicate the strategy.
Then, the company should start the new competitive advantage.
2. List and explain each of the five forces in Porter's Five Forces Model.
Buyer power - High when buyers have many choices of whom to buy. - Low when their choices is few. - To reduce buyer power and create competitive advantage, an organization must make it more attractive to buy from the company not from the competitors.
Bargaining Power of Customers - Customers can grow large and powerful as a result of their market share. - Many choices of whom to buy from. - Low when comes to limited items. (Eg: Used loyalty programs such as Jusco card, Tesco card, being a members to get the discount)
Supplier power - High when buyers have few choices of whom to buy from. - Low when their choices are many. - Best practise of IT to create CA. - (Eg: B2B marketplace private exchage allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids.
Supplier power is the converse of buyer power. (Organizations want supplier power to be low between suppliers and organization)(Organizations want supplier power to be high between organization and customers).
Threat of Substitute products and services - High when there are many alternatives to a product or service. - Low when there are few alternatives from which to choose. - Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.
To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists. (Eg: electronic product same function different brands).
Switching cost - costs can make customer reluctant to switch to another product or service.
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 a market. - Entry barriers is a product or services feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.
Many threats come from companies that do not yet exist or have a presence in a given industry or market. - The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors. (Eg; New bank- online paying bills, account monitoring).
Rivalry among existence competitors - High when competitors is fierce in a market. - Low when competitors is more complacent.
Existing competitors are not much of the threat: typically each firm has found its "niche". - However, changes in management, ownership, or 'the rules of the game' can give rise to serious threats to long term survival from existing firms.
Buyer power - High when buyers have many choices of whom to buy. - Low when their choices is few. - To reduce buyer power and create competitive advantage, an organization must make it more attractive to buy from the company not from the competitors.
Bargaining Power of Customers - Customers can grow large and powerful as a result of their market share. - Many choices of whom to buy from. - Low when comes to limited items. (Eg: Used loyalty programs such as Jusco card, Tesco card, being a members to get the discount)
Supplier power - High when buyers have few choices of whom to buy from. - Low when their choices are many. - Best practise of IT to create CA. - (Eg: B2B marketplace private exchage allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids.
Supplier power is the converse of buyer power. (Organizations want supplier power to be low between suppliers and organization)(Organizations want supplier power to be high between organization and customers).
Threat of Substitute products and services - High when there are many alternatives to a product or service. - Low when there are few alternatives from which to choose. - Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.
To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists. (Eg: electronic product same function different brands).
Switching cost - costs can make customer reluctant to switch to another product or service.
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 a market. - Entry barriers is a product or services feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.
Many threats come from companies that do not yet exist or have a presence in a given industry or market. - The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors. (Eg; New bank- online paying bills, account monitoring).
Rivalry among existence competitors - High when competitors is fierce in a market. - Low when competitors is more complacent.
Existing competitors are not much of the threat: typically each firm has found its "niche". - However, changes in management, ownership, or 'the rules of the game' can give rise to serious threats to long term survival from existing firms.
3. Compare Porter's three generic strategies.
Cost Leadership - Becoming a low-cost producer in the industry allows the company to lower prices to customer. - Competitors with higher costs cannot afford to compete with the low-cost leader on price.
Differentiate - Create CA by distinguishing their products on one or more features important to their customers. - Unique features or benefits may justify price differences and/or stimulate demand. (Eg: I-care by Proton).
Focused Strategy - Target to niche market. - Concentrates on either cost leadership or differentiation.
Differentiate - Create CA by distinguishing their products on one or more features important to their customers. - Unique features or benefits may justify price differences and/or stimulate demand. (Eg: I-care by Proton).
Focused Strategy - Target to niche market. - Concentrates on either cost leadership or differentiation.
4. Describe the relationship between business processes and value chain.
Supply chain - a chain or series of processes that adds value to product and service for customer. - Add value to its products and services that support a profit margin for the firm.
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