Chapter 2 : The Competitive's Benefits

Hey! Whazzup..!! This week i'm going to share about the competitive advantages.

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

However it is only temporary because the other competitors will always try to duplicate the strategy.Then the company have to start with a new strategy.

There's Michael Porter’s Five Forces Model as an useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

Michael Porter’s Five Forces Model including :

1)Buyer power
2)Supplier power
3)Threat of substitute products or services.
4)Threats of new entrants.
5)Rivalry among existing companies.

BUYER POWER :

The first one is buyer power.Buyer power will be high when buyers have many choices of whom to buy and will be low when their choices are 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.
Best practices of IT-based
Loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays )

SUPPLIER POWER :

Will be high when buyer have fewer choices to buy from and it will be low when their choices are many.Best practices of IT to create competitive advantage.As example by using B2B marketplace as private exchange that 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.

THREAT OF SUBSTITUTE PRODUCTS OR 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.
Best practices of IT
E.g. Electronic product -same function different brands

- Threat of substitutes,customers can use different products to fulfill the same need.E.g: electronic product -same function different brands.

Switching cost- costs can make customer reluctant to change to another product or service.

THREAT OF NEW ENTRANTS :

It high when easy a new competitor to enter a new market and it's low when there's barrier to entering a market.

Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.
Best practices of IT
E.g. new bank must offers online paying bills, acc monitoring to compete.

Threat of New Entrants.
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.
E.g. new bank (online paying bills, acc monitoring)

RIVALRY AMONG EXISTING COMPANIES

High – when competition is fierce in a market
Low – when competition is more complacent
Best Practices of IT
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 Value Chains- Targeting Business Processes :
Supply Chain is a chain or series of processes that adds value to product & service for customer.
Add value to its products and services that support a profit margin for the firm.

Three Generic Strategies