Chapter 2: Identifying Competitive Advantage

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Competitive Advantage
What is competitive advantage?

 Wikipedia:
a condition or circumstance that puts a company in a favorable or superior business position.

"expansion is vital to maintaining a competitive advantage"

  • product/service that organization's customer place a greater value on than similar offerings from a competitor
  • temporary because competitors keep duplicate the strategy
  • Then, company should start a new competitive advantage



The Five Forces Model


Buyer Power:

  • High - when buyers have many choices of whom to buy
  • Low - when their choices are few
  • To reduce buyer power - organization must make it more attractive to buy from the company not form the competitors.
  • Best practices of IT based 
  • Example: Loyalty program in travel - rewards on free airline tickets/hotel stays

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
  • Example: B2B marketplace - private exchange allow a single buyer to posts it needs and opens the bidding to any supplier who would care to bid.
  • Reverse auction - auction format in which increasingly lower bids. 

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, on organization would like to be on a market in which there are few substitutes of their product or services
  • Best practices of IT
  • Example: Electronic product - same function different brands
Threat 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 - product/service feature that customers have to come to expect from organizations and must be offered by entering organization to compete and survive.
  • Best practices of IT
  • Example: New bank must offers online paying bills, acc monitoring to compete

Rivalry among existence competitors:

  • High - when competition is fierce in a market
  • Low - when competition is more complacent 
  • Best practices of IT
  • Example: 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
Walmart



The Three Generic Strategies





The End of Chapter 2: Identifying Competitive Advantage by syahirahzfri. 
Thank you for reading :)



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