CHAPTER 2
IDENTIFYING COMPETITIVE ADVANTAGES
Competitive advantages is a product or service
that an organization’s customers place a greater
value on than similar offerings from a competitor
THE FIVE FORCES MODEL- EVALUATING BUSINESS SEGMENTS
1. Buyer Power ( Focus on Low )
> High when buyers have many choices.
> Low when their choices are few.
>To reduce buyer power, an organization must make it more attractive to buy from the company not from the competitors.
>Best practices of IT- based
= Loyalty program in travel industry ( e.g: rewards on free airline tickets or hotel stays.
>Customer 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
2. Supplier Power ( Focus on high )
>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.
Supply Chain consists of all parties involve the sale of product or raw material.
Best practices of IT to create competitive advantage: Business-to-Business (B2B) marketplace, private exchange 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.
3. 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 substitute of their products or services.
> Best Practise of IT. E.g: Electronic product - same function different brands.
>To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.
> Switching Cost- cost can make customer reluctant to switch to another product or services.
4. Threat of New Entrants
>Entry barriers is a product or service features that customers have come to expect from organization to compete and survive.
>Best Practise IT. E.g : new bank must offers online paying bills, acc monitoring to compete.
5. Rivalry Among Existence competitors.
> High when competition is fierce in a market.
> Low when competition is more complacent
> Best Practice IT. E.g : Wal-mart and its suppliers using IT-enabled system for communication and track product at aisles by effective tagging system.
>Reduce cost by using effective supply chain.
THE THREE GENERICS STRATEGIES
EXAMPLE OF GENERIC STRATEGIES
RELATIONSHIP BETWEEN BUSINESS PROCESS 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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