IDENTIFYING COMPETITIVE ADVANTAGE

Identifying competitive advantage : To survive and thrive an organization must create a competitive advantage.

Competitive advantage : A product or service that an organization's customers place a greater value on than similar offerings from a competitor.

First-mover advantage : It occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

Environmental scanning : The acquisition and analysis of events and trends in the environment external to an organization

Three common tool that used in industry to analyze and develop competitive advantage is :

• Porter's Five Forces Model
• Porter's Three Generis Strategies
• Relationship Between Business Process And Value Chain

Micheal Porter's Five Forces Model

• Buyer Power : Assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item.

• High - when buyers have few choices of whom to buy they will to stick in one brand or company.

How to reduce buyer power ?

1. Switching costs - costs that can make customers reluctant to switch to another product or service.
2. Loyalty program - rewards customers based on the amount of business they do with a particular organization.

• Supplier Power : To assessed by the suppliers' ability to directly impact the price they are charging for supplies (including materials, labor, and services).

• High - When the buyers have few choices of whom to buy from they have no choices and they will stick to one brand.

• Supply chain : Is consists of all parties involved in the procurement of a product or raw material

• Threat of substitute products or services : High when there are many alternatives to a product or service and low when there are few alternatives from which to choose

• Business-to-Business (B2B) : A situation where one business makes a commercial transaction with another. This typically occurs when:

1. A business is sourcing materials for their production process (e.g. a food manufacturer purchasing salt).
2. A business needs the services of another for operational reasons (e.g. a food manufacturer employing an accountancy firm to audit their finances).
3. A business re-sells goods and services produced by others (e.g. a retailer buying the end product from the food manufacturer).

• Threat of new entrants : High when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market

• Entry barriers : A product or service feature that customers have come to expect from organizations in a particular industry and must be offered by an entering organization to compete and survive.

• Rivalry among existence competitors : High when competition is fierce in a market and low when competition is more complacent

• Normally organization will follow one of  Porter's Three Generic Strategy Operation when entering a new market.

value creation

• Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy such as :

• Business Process : A collection of linked tasks which find their end in the delivery of a service or product to a client. A business process has also been defined as a set of activities and tasks that, once completed, will accomplish an organizational goal.

• Value Chain : The process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales service.