chapter 2 >> Identifying Competitive Advantages

IDENTIFYING COMPETITIVE ADVANTAGES

Purpose - To survive and thrive an organization

Competitive advantage - a product or service that that have greater value compare to the competitors which is created by an organizations.

First-mover advantage - occurs when an organization being the first to the market with a competitive advantage and it is can significantly impact its market share.

* organizations watch their competition through:

environmental scanning - the analysis of the environment and the trends.

THE FIVE FORCES MODEL - Evaluating Business Segment

Buyer Power

" high when buyers have many choices of whom to buy from and low when their choices are few "

* to reduce buyer power is through :

Loyalty program - rewards customer based on the amount of business they do with a particular organization

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

Supplier Power

 " high when buyers have few choices of whom to buy from and low when their choices are many "

Supply chain

* organizations that are buying goods or services through the supply chain can create competitive advantage by decreasing supplier power through :
Business-to-Business (B2B) marketplace - an Internet-based service that brings together many buyers and sellers.
Two types of B2B marketplace :
i) Private exchange - a single buyer posts its needs and then opens the bidding to any supplier who would care to bid
ii) Reverse auction - an auction format in which increasingly lower bids are solicited from organizations willing to supply the desired product or service at an increasingly lower price

Threat of substitute products or services

"  high when there are many alternatives to a products or services and low when there are few alternatives from which to choose "
Switching costs - costs that can make customers reluctant to switch to another product or service

Threat of New Entrants

" high when it is easy for new competitors to enter the market and low when there are significant entry barriers to entering the market "
Entry Barrier - a product or service feature that customers have come to expect from organizations in a particular industry and must be offered  by an entering organization to compete and survive.

RIVALRY AMONG EXISTING COMPETITORS

" high when competition is fierce in a market and low when competition is more complacent "

 THE THREE GENERIC STRATEGIES - Creating a Business Focus

 Cost Leadership
- it is occurs when an organization is practicing the broad market or target as its competitive scope and have a low cost in its cost strategy/competitive advantage.
e.g : AirAsia, Tesco, Econsave
Differentiation
- it is when an organization has a broad market and with the higher cost.
- it is not suitable for a small company.
e.g : BMW Group Automobile, Apple, Mercedez-Benz Automobile
Focused Strategy
- it is occurs when an organization have a narrow market. it can have a low or high cost.
e.g : narrow market , low cost - jukebox
narrow market. high cost - Tiffany & co, Clarks

VALUE CREATION

- Once an organization choose its strategy, it can use tools such a value creation to determine whether it is success or fail from its chosen strategy.

Business Process - a standardized set of activities that accomplish a specific task, such as processing a customer's order

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

  

The competitive advantage is to :
 i) Target high value-adding activities to further enhance their value
ii) Target low value-adding activities to increase their value
iii) Perform some combination of the two

* Value chains with Porter's Five Forces