CHAPTER 2 Identify Competitive Advantages

1.Learning Outcomes

1.1  Explain why competitive advantages are typically temporary.

1.2  List and describe each of the five forces in Porter's Five Forces Model.

1.3  Compare Porter's three generic strategies.

1.4  describe the relationship business processes and value chains.

2. Identifying Competitive Advantages

2.1  To survive and thrive an organization must create a competitive advantage.

  >  Competitive advantages - a product or service that an organization's customers place a greater value on than similar offerings from a competitor.
Example : Dell Computers : the product and service is directly delivery  to the front your door.
  >  First-mover advantage - occurs when an organization can significantly impact itsmaeket share by being first to market with a competitive advantages.
Example : Air Asia the first airplane offer low cost ticket and everyone can fly.

2.2  Organizations watch their competitive through environmental scanning.

  > Environment scanning - the acquisition and analysis if events and treads in the environment external to an organization.

2.3  Three common tools used in industry to analyze an d develop competitve advantages include:

• Porter's  Five Forces Model
• Porter's three generic strategies
• value chains

3. The Five Forces Model Evaluating Business Segments

3.1 Buyer Power- 

• High - when buyers have many choices of whom to buy
• Low - when their choise are few
• To reduce buyer power (and ceate competitive advantage). an organization must take it more attractive to buy from the company not from the competitors.

 Loyalty Program - reward customers based on the amount of business they do with a particular organization.

Example : used loyalty programs (Jusco card, Tesco card, being a members to get the discount)

Switching Costs - cost that can make customers reluctant to switch to another product or service

3.2 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
• Business-to-Business (B2B) marketplace

Example : 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 bid

Supply chain - consist of all parties involved in the procurement of a product or raw material

3.3  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
• Customers can reluctant to switch to another product or service
• To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists
• Example : Electronic product - same functions different brands

3.4 Threat of New Entrants

• High - when it is easy for new competitors to entry a market
• Low - when 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 offerd by an entering organization to compete and survive.

3.5 Rivalry Among Existing Competitors

• High – when competition is fierce in a market
• Low – when competition is more complacent
• Need to know how to create best selling in industry
• Example : Maxis, Celcom, Digi have a new competitive like Umobile.

Competitive is always more intense in some industries than in others, the overall trend is toward increased competitive is just about every industry.

4. The Three Generic Strategies

4.1 Organizations typically follow one of Porter's three generic strategies when entering a new market.

   > Cost leadership with a broad market

    Example : Tesco, Mydin, Giants

   > Differentiation the product must be unique 

   > High cost

    Example : Pavilion, JPO, Mitsui

5. Value Creation

5.1  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.

  > Value chain - views an organization as a series of processes, each of which adds value to the product or service for each customer

^ Primary activities too know as business process

^ First we must know what our type company business

^ Need to create competitive advantages

 5.2  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

Value chain with Porter's Five Forces :

okay that all of chapter 2. Thank you for reading ^_^