CHAPTER 2 : IDENTIFYING COMPETITIVE ADVANTAGE

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. Identifying Competitive Advantage have 3 points which is :

1. Five Forces Modal
2. Generics Strategies
3. Between business process and value chain.

Five Forces Model

1. Buyer Power

• High - when buyers have many choices for whom to buy.
• Low - when their choices are few.

2. Supplier Power

• High - when buyers have many choices for whom to buy.
• Low - when their choices are many.

3. Threat of substitute products or services

• High - when there are many alternatives to a product or services.
• Low - when there are few alternatives from which to choose.

4. Threats of new entrants

• High - when it is easy for new competitors to enter a market.
• Low - when there are significant entry barriers to entering to market.

5. Rivalry among existing companies.

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

The Three Generics Strategies

1. Cost leadership

• Becoming a low-cost producer in the industry allows the company to lower prices to customers.

2. Differentiation

• Create competitive advantage by distinguishing their products on one or more features import to their customers.

3. Focused Strategies

• concentrates on either cost leadership or differentiation

Between Business Process and Value Chain

Supply Chain - a chain or series of processes that adds to product & service for customer.

Add value to its products and services that support a profit margin for the firm.