This is the chapter two from the book we used for learning process in class, entitled 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. Unfortunately, competitive advantage is temporary because competitors keep duplicate the strategy. Then, the company should start the new competitive advantage
Competitive advantage consists of three elements,
1 ) Porter's Five Force Model
2 ) Porter's generic strategic strategies
3 ) Relationship between business process and value chain.
In diagram 1, those are the elements in competitive advantage. These are the summary of the chapter 2.
Diagram 1
Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.
The Fives Forces Model
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.
5. 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.
Diagram 2
Diagram 2
The
Three Generics Strategies
3 generic strategies
Diagram 3
The
Value Chains-
Targeting Business Processes
Targeting Business Processes
qSupply Chain - a chain or series of processes that adds value to product & service for customer.
qAdd value to its products and services
that support a profit margin for the firm
Supply Chain Diagram
A chain or series of processes that
adds value to product & service for customer.
End.
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