Chapter 2 : IDENTIFYING COMPETITIVE ADVANTAGE

Chapter 2 : IDENTIFYING COMPETITIVE ADVANTAGE

IDENTIFYING COMPETITIVE ADVANTAGE

Definition of competitive advantages is :-

• 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.

1.1 The Michael Porter's Five Forces Model Of Competition.

credit to http://www.sqaki.com//11/PorterMichaelFiveCompetitiveForces/

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.

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 (Aeon member 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.

An organization within the Supply Chain

• Supplier power is the converse of buyer power. 

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. 

The Competitive Environment

Threat of Substitutes.  

• To the extent that customers can use different products to fullfill 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.

The Competitive Environment

• 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)

5. Rivalry among existence competitors

High – when competition is fierce in a market

Low – when competition is more complacent

The Competitive Environment

• Existing competitors are not much of the threat:  typically each firm has found its "niche".  
• However, changes in management, ownership, or "the rules of the game" can give rise to serious threats to long term survival from existing firms .
• E.g: the airline industry faces serious threats from airlines operating in bankruptcy, who do not pay on the debts while slashing fares against those healthy airlines who do pay on debt. (MAS & AIR ASIA)

1.2 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 costs cannot afford to compete with the low-cost leader on price.

Differentiation

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

Chapter 1 : Business Driven Technology Overview

Chapter 1 : Business Driven Technology Overview

Business Driven Technology Overview

1.1 Information Technology’s Role in Business

We can see that information technology( IT ) is used in many area of business operations

which means information technology is EVERYWHERE in business!!!

Each area of department has its own systems and will communicate on each other to give and received data and resource.

Using IT will make the business operations performs more effective and efficient.

1.2 Information Technology Basics

IT is a place where the use of technology in managing and processing information and it is a key to business success and innovation.

Management information system (MIS) is the general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems. it is also similar to Accounting, Finance, Operations, and Human Resources.

When beginning to learn about IT, it is important to understand about :-

• Data, information, and business intelligence IT resources
• IT cultures 

Information.

Data - raw facts that describe the characteristic of an event

Information - data converted into a meaningful and useful context

Business intelligence – applications and technologies that are used to support decision-making efforts

  

1.3 IT Resources.

                  

• People use

• Information technology to work with

• Information

1.4 IT Cultures

Organizational information cultures include:-

Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed.

Sharing Culture  - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.

Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages

Sharing Culture  - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.

Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.