LEARNING
OUTCOMES
2.1
Explain why competitive advantages are typically temporary
2.2 List
and describe each of the five forces in Porter's Five Forces Model
2.3
Compare Porter's three generic strategies
2.4
Describe the relationship between business processes and value chains
IDENTIFYING COMPETITIVE ADVANTAGES
To survive and thrive an organization must create a competitive
advantage
- competitive advantage - a product or service that an organization's customers place a greater value on than similar offerings from a competitors
- First-mover advantages - occurs when an organization can significantly Impact its market share by being first to market with a competitive advantage
- Example : Air-asia are the ticket low cost
Organization watch their competition through
environment scanning
- Environment scanning- the acquisition and analysis of event and trends in the environment external to an organization
Three common tools used in industry to analyze and
develop and competitive advantages include
- 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
- low - when their choices are few
Ways to reduce buyer power is through loyalty program
- Loyalty program - rewards customers based on the amount of business they do with a particular organization
- Example : Tesco Card
- Switching cost - costs that can make customers reluctant to switch to another product or service
SUPPLLIER POWER
- High - when buyers have few choices of whom to buy from
- Low - when their choices are many
Supply chain - consists of all parties involved in the procurement of a product or raw material
- can create a competitive advantages by locating alternative supply sources (decreasing supplier power ) through B2B marketplace
- Business-to-business(B2B) marketplaces - an internt is based service that brings together many buyers and seller
Two types
of business-to-business(B2B) marketplaces
- Private exchnge - a single buyer posts its needs and then opens the bidding to any supplier who would care to bid
- Reverse auction - an auction format in which increasingly lower bids
THREAT
OF SUBSTITUTES PRODUCTS OR SERVICE
- High – when there are many alternative to a product or service
- Low – when there are few alternative from which to choose
- Switching cost – costs that can make customers reluctant to switch to another product or service
THREAT OF NEW ENTRANTS
- High – it is easy for new competitors to enter a market
- Low - there are significant entry barriers to entering a market
- Example : astro and Air-asia
Entry Barrier
- a product or service feature that customers have come to expect from organization in a particular industry.
- Must be offered by an entering organization to compete and survive.
RIVALRY AMONG EXISTING COMPETITORS
- High – when competitors is fierce in a market
- Low – when competition is more complacent
- Need to know how to create best selling in industry
- Example :Maxis ,Digi, Celcom and U-mobile
Competition is
always more intense in some industries than in others, the overall trend is toward
increased competitive is just about every industry.
THE THREE GENERIC STRATEGIES- CREATING
A BUSINESS FOCUS
Organization
typically follow one of Porter’s Three Generic Strategies when entering a new
market
Example :
Once an
organization choose its strategy, it can use tools such as the value chain to
determine the success or failure of its chosen strategy.
- Business process - a standardized set of activities that accomplish a specific task such as processing a customer’s order
- Value chain - views an organization as a series of processes, each of which adds value to the product or service for each customer.
Customers
determine the extent to which each activity adds value to the product or
service
The competitive
advantage is to :
- Target high value-adding activities to further enhance their value
- Target low value-adding activities to increase their value
- perform some combination of the two
