CHAPTER 2 IDENTIFYING COMPETITIVE ADVANTAGE

CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGE

 

 

1.       BUYER POWER.

·         High- when buyers have many choics 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 IT-based

-loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays)

The competitive environment

Bargaining power of customers./buyer power

·         Customers can grow large and powerful as a result of their market share.

·         Many choices to whom to buy from.

·         Low when comes to limited items.

·         E.g.: used loyalty programs (jusco cars, tesco cards, - being a mmbers to get the discount)

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 advantages.

·         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.

An organization within the supply chain.

-supplier power is the converse of buyer power.

3.                   TREAT OF SUBSTITUTE PRODUCT & 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 IT

- E.g. electronic product-same function different brands.

The competitive environment.

Treat of substitutes:

·         To the extent that customers can use different products to fulfill the same need, threat of substitutes exists.

·         E.g.: electronic product-same function different brands

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

4.                TREAT OF NEW ENTRANTS

·         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 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 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 THREE GENERICS STRATEGIES

 

 

 

 THE VALUE CHAINS-TARGETING BUSINESS PROCESSES     

·         Supply chain-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.