Welcome to the journey of MGT 300: HERE WE GO FOR THE SECOND ONE !

IDENTIFYING COMPETITIVE ADVANTAGE

¡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

Buyer power

Supplier power

Threat of substitute products or services.

Threats of new entrants.

Rivalry among existing companies.

Introduction

Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

Anddd.. THIS IS THE MAIN POINTS FOR THIS CHAPTER ..

1. 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 )

The Competitive Environment

Bargaining Power of Customers./Buyer power

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

Many choices of whom to buy from

Low when comes to limited items

E.g.: used loyalty programs (jusco card, tesco card, - being a members 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 advantage.

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.

3. 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 brand

The Competitive Environment

Threat of Substitutes.

To the extent that customers can use different products to fulfill the same need, the 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. 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 and survive.

Best practices of IT

E.g. new bank must offers online paying bills, acc monitoring to compete.

The Competitive Environment

Threat of New Entrants.

Many threats come from companies that do not yet exist or have a presence in a given industry or market.

The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.

E.g. new bank (online paying bills, acc monitoring)

EHH? HABIS DAH? HEHE BELUM LAGI...

The Three Generics Strategies

1) COST LEADERSHIP

Be a low cost producer in the industry allows the company to lower prices to customers
Competitors with higher costs cannot afford to compete with the low-cost leader on prices.

2) DIFFERENTIATION