WHAT IS COMPETITIVE ADVANTAGE?
· A product or services that an organization’s customers place a greater value on than similar offerings from a competitor.
· Unfortunately, CA is temporary because competitors keep duplicates the strategy.
· Then, the company should start the new competitive advantage.
· Michael porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.
· 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)
· 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.)
· Supplier power is the converse of buyer power.
Suppliers > organization > customers
THREAT OF SUBSTITUTE PRODUCTS & SERVICES
· High- when there are many alternatives to a product or services.
· 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 substitute of their product or services.
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 is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete.
RIVALRY AMONG EXISTENCE COMPEITORS
· High- when competition is fierce in a market.
· Low- when competition is more complacent.
THE THREE GENERICS STRATEGIES
· Cost leadership
- Becoming a low-cost producer in the industry allows the company to lower prices to customers.
- Competitors with higher cost cannot afford to compete with the low cost leader on price.
- Create competitive advantage by distinguishing their products on one or more features important to their customers.
- Unique features or benefits may justify price differences and/or stimulate demand.