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Tuesday, 2 July 2013



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 istemporary because competitiors keep duplicate the strategy.
  • Then, the company should start the new competitive advantage.

~Five Forces Model by Michael Porter -  useful tools to aid   organizations 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.
            ~For example, 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.
        # Supplier power is the converse of buyer power.
          ~Best practices of IT to create competitive advantage.
          ~For example, B2B marketplace - private exchange allow a single buyer to post it need and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower birds.


       >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.
           -For example, electronic product same function different brands.


         * 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.
             -For example, new bank must offers online paying bills, account monitoring to compete.


         >High - when competition is fierce in a market.
         >Low - when competition is more complecent.
         >Best Practices of IT.
             ~Wal-mart and its suppliers using IT-enable system for communication and track product at aisles by effective tagging system.
             ~Reduce cost by using effective supply chain.

ThE ThReE GeNeRiC StRaTeGiEs:~

1. 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 low cost leader on price.

2. Differentiation - Create competitive advantage by distinguish their products on one or more features important to their customers. Unique features or benefits may justify price differences and/or stimulate demand. Ex: i-care by Proton.

3. Focused Strategy - Target to a niche market, concentrates on either cost leadership or differentiation.

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