CHAPTER 1 AND CHAPTER 2 PASYEAR QUESTION

MARCH 2012

PART C

QUESTION 2

Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.  They are rivalry among existing competitors,  buyer power, supplier power, threat of new entrants and threat of substitude product.

Rivalry among competitors have four :
1) Threat of new entrant
2) Bargaining power of customers
3) Threat of subtitutes
4) Bargaining power of supplier

1.Buyer Power

·         High – when buyers have many choices of whom to buy.

·         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 )

2. Supplier Power

·         High – when buyers have few choices of whom to buy from.

·         Low – when their choices are many.

·         Best practices of IT to create competitive advantage.

·         E.g. 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 & Services

·         High – when it is easy for new competitors to enter a market.

·         Low – when there are significant entry barriers 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.

4. Rivalry among existence competitors

·         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.

OCTOBER 2012

PART C

QUESTION2 (A)

Porter’s 3 generic strategies are cost leadership, differentiation and focused strategies.

1 ) 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.

2 ) Differentiation

•          Create competitive advantage by distinguishing 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

3 ) Focused strategy

•          Target to a niche market

•          Concentrates on either cost leadership or differentiation

Example of brand of cars

1)      Broad market, cost leadership strategy : HYUNDAI

2)      Broad market, differentiation strategy : AUDI

3)      Focused market, cost leadership strategy : KIA

4)      Focused market, differentiation strategy  : HUMMER

MARCH 2013

PART C

QUESTION 1 (A)

Five primary value activities are inbound logistics, operations, outbound logistics, marketing and sales and customers service.

Inbound logistics are include the receiving ,warehousing,and inventory control of input materials.Operations are the value-creating activities that transform the inputs into the final product.Outbound logistics are the activities required to get the finished product to the customer,including warehousing,order fulfillment,etc.Marketing and sales are those activities associated with getting buyers to purchase the product,including channel selection,advertising,pricing,etc.Service activities are those that maintain and enhance the product's value including customer support,repair services,etc.