CHAPTER 2: IDENTIFYING COMPETITIVE ADVANTAGE

CHAPTER 2: IDENTIFYING COMPETITIVE ADVANTAGE
                        

Assalamualaikum everyone..!!! We meet again..! This week entry is about second chapter of IT which is IDENTIFIYING COMPETITIVE ADVANTAGES. To survive and thrive an organization must create a competitive advantage. 

                                        WHAT IS COMPETITIVE ADVANTAGE??

Competitive advantage is a feature of a product or service on which customers place a greater value than they do on similar offerings from competitors.

Unfortunately, competitive advantage is temporary because competitors keep duplicate the strategy. Then, the company should start the new competitive advantage.

Organization watch their competition through environmental scanning. Environmental scanning..??

Ok, environmental scanning is the acquisition and analysis of events and trends in the environment external to an organization.

There are 3 common tools that used in industry to analyze and develop competitive advantages. The 3 common tools are :

·         Porter’s Five Forces Model

·         Porter’s three generic strategies

·         Value chains

PORTER’S FIVE FORCES MODEL

                             

·                    Buyer power-  high when buyers have many choices of whom to buy from and low when their choices are few. One way to reduce buyer power is through loyalty programs.  Loyalty programs means rewards customers based on the amount of business they do with particular organization.

·                    Supplier power- high when buyers have few choices of whom to buy from. But supplier power will be low when their choices are many. Organizations that are buying goods and services in the supply chain can create a competitive advantage by locating alternative supply sources (decreasing supply power) through B2B marketplaces.

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

2 types of (B2B) marketplaces: private exchange

                                                : reverse exchange

 Supplier power is the converse of buyer power :

                  

·                    Threat of Substitute products or services- high when there are many alternatives to a product or services and low when there are few alternatives from which to choose. Ideally, an organization would like to be an a market in which there are few substitutes of their product or services. For example : electronic product-same function different brands.

·                    Threat of new entrance- high when it is easy for new competitors to enters 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 organization to compete and survive. For example: new bank must offers online paying bills, acc monitoring to compete.

·                    Rivalry among existence competitors- high when competitors is fierce in a market and low when competition is more complacent. For example:  Wal-mart and its suppliers using IT-enabled system for communication and track product at aisles by effective tagging system.

PORTER’S 3 GENERICS STRATEGIES

Organizations typically follow one of Porter’s 3 generic strategies when entering a new market.

v Cost  Leadership

-Becoming a low-cost producer in the industry allows the company to lower prices to customers

-Competitors with higher costs cannot afford to compete with the low-cost leader on price.

 v Differentiation

-Create competitive advantage by distinguish their products on one or more features important  

  to their customers.

- Unique features or benefits may justify price differences and/or stimulate demand

-Ex: i-care by Proton

 v  Focused strategy

-Target to a niche market

-Concentrates on either cost leadership or differentiation.

                             

RELATIONSHIP BETWEEN BUSINESS PROCESS AND VALUE CHAIN

Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy.

-Value chain= views an organization as a series of processes, each of which adds value to the product or services for each customer.

Supply chain- a chain or series of processes that adds value to product and service for customer.

             

This picture below shows the value chains with Porter’s Five Forces

               

That’s all from me.. thank you for reading ya.. J

                                
                                                                           THE END..