Chapter 2 : Identifying Competitive Advantage

                WHAT IS COMPETITIVE ADVANTAGE ?

·         A product or service that an organization’s customers place a greater value on than similar offerings from a competitor.

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

·         Michael Porter’s find forces model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

The Five Forces Model:

·         Buyer Power

ü  High – when buyers have many choices of whom to buy

ü  Low – when their choices are few

ü  To reduce buyer power, an organization must make it more attractive to buy from the company not from the competitors.

ü  Best practices of IT-based

Supplier Power

         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.

Threat of Substitute products and services

       High – when there are many alternative to a product or service.

       Low – when there are few alternative from which to choose.

       Ideally, an organization would like to be on a market in which there are few substitute of their product or services.

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 the market.

      Entering barriers is a product or service feature that customers have come to expect from organization and must be offered by entering the organization to compete and survive.

      Best practices of IT

Rivalry among existence competitors

     High – when competition is fear in a market.

     Low – when competition is more complacent.

     Best practices of IT.

            Reduce cost buy using effective supply chain.

THE THREE GENERICS STRATEGIES

1.       Cost leadership

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

-competitors with higher cost cannot afford to compete with the low cost leader on price

2.       Differentiation

-create competitive advantage by distinguishing their product on one or more features important to their customers.

-unique features or benefit may justify price differences or stimulate demand.

-Ex : i-care by Proton

3.       Focused strategy

-target to niche market.

-concentrates on either cost leadership or differentation