Chapter 2: Identifying Competitive Advantages

 Competitive Advantage

- A product or service that an organization's customers place a greater value on than similar offerings from a competitors.

The Five Forces Model

- Micheal Porter's five forces model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

Buyer Power

• The ability of buyers to affect the price they must paid for an item. Customers can grow large and powerful as a result of their market share.
• High buyer power- when buyers have many choices of whom to buy.
• Low buyers power- when their choices are few. (limited items)
• To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors.

Supplier Power

• The suppliers' ability to influence the prices they charge for supplies. 
• High supplier power- when buyers have few choices of whom to buy from.
• Low supplier power- when their choices are many.
• Using MIS to find alternative products is one way of decreasing supplier power.

Threat of Substitute Products and Services

• High- when they 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 which there are few substitutes 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 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.

Rivalry Among Existence Competitors

• High- when competition is fierce in a market.
• Low- when competition is more complacent.

The Three Generic Strategies

The Value Chain Analysis 

• Supply chain- a chabin or series of processes that adds value to product and service for customer.
• Add value to its products and services that support a profit margin for the firm.