Introduction
¡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, CA is temporary because competitors keep duplicate the strategy.
§Then, the company should start the new competitive advantage.
Five Forces Model
1.Buyer power
2.Supplier power
3.Threat of substitute products or services.
4.Threats of new entrants.
5.Rivalry among existing companies.
¡Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.
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 )
Bargaining Power of Customers./Buyer power
oCustomers can grow large and powerful as a result of their market share.
oMany choices of whom to buy from
oLow when comes to limited items
oE.g.: used loyalty programs (jusco card, tesco card, - being a members to get the discount)
Threat of Substitute products & 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 New Entrants.
oMany threats come from companies that do not yet exist or have a presence in a given industry or market.
oThe threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.
oE.g. new bank (online paying bills, acc monitoring)
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.
¡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
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
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