CHAPTER 2 - IDENTIFYING COMPETITIVE ADVANTAGES (FIVE FORCES MODEL)

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CHAPTER 2 - IDENTIFYING COMPETITIVE ADVANTAGES (FIVE FORCES MODEL) by Mind Map: CHAPTER 2 - IDENTIFYING COMPETITIVE ADVANTAGES (FIVE FORCES MODEL)

1. COMPETITIVE ADVANTAGE

1.1. A product or services that an organization’s customers place a greater value on than similar offerings from a competitor

2. Buyer Power

2.1. High – when buyers have many choices of whom to buy

2.2. Low – when their choices are few

2.3. Loyalty program in travel industry, for example rewards on free airline tickets or hotel stays

2.4. To reduce buyer power (and create competitive advantage) an organization must make it more attractive to buy from the company not from the competitors.

3. Supplier Power

3.1. Consists all parties involved, directly or indirectly in obtaining raw materials or a product.

3.2. High – when buyers have few choices of whom to buy from

3.3. Low – when their choices are many

3.4. Best practices of IT to create competitive advantage : B2B marketplace- private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid.Reverse auction is an auction format in which increasingly lower bids.

4. Threat of substitute products or services

4.1. switching cost

4.2. example ; coffee and tea

4.3. Ideally, an organization would like to be on a market in which there a few substitutes of their product or services.

4.4. Best practices of IT : Electronic product- same function different brands.

5. Threat of new entrants

5.1. entry barrier

5.2. a product or services feature that customers have come to expect from organizations in a particular industry

5.3. High : when it easy for new competitors to enter a market.

5.4. Low : when there are significant entry barriers to entering a market.

6. Rivalry among existing competitors

6.1. high when competition is fierce in a market and low when competition is more complacent

6.2. High : when competition is fierce in a market.

6.3. Low : when competition is more complacent

6.4. Best practice IT : Wal Mart and its suppliers using IT enabled system for communication and track product at aisles by effective tagging system.

6.5. Reduce cost by using effective supply chain.