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Chapter 2 IT
Chapter 2 IT
Rivalry among
existing
competitors
Cost leadership
Competitive Porters 3
Advantage generis Differentiation
strategies
Focused
strategies
Relationship
between business
process and value
chain
1. Explain why competitive advantages are
typically temporary.
2. List and explain each of the five forces in
Porters Five Forces Model.
3. Compare Porters three generic strategies.
4. Describe the relationship between business
processes and value chain.
What is competitive advantage?
A product or service that an organizations
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.
Five Forces
Model
1. Buyer power
2. Supplier power
Michael Porters Five Forces
3. Threat of Model is useful tool to aid
substitute
products or organization in challenging
services. decision whether to join a new
4. Threats of new
entrants. industry or industry segment.
5. Rivalry among
existing
companies.
Source: Adapted from Michael E. Porter, How Competitive Forces Shape Strategy, Harvard Business Review 57, no. 2 (March/April 1979): 137145.
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.
Best practices of IT-based
Loyalty program in travel industry (e.g. rewards
on free airline tickets or hotel stays )
Bargaining Power of Customers./Buyer power
o Customers can grow large and powerful as a result of their
market share.
o Many choices of whom to buy from
o Low when comes to limited items
o E.g.: used loyalty programs (jusco card, tesco card, - being a
members to get the discount)
High when buyers have few choices of
whom to buy from.
Low when their choices are many.
Best practices of IT to create competitive
advantage.
E.g. 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.
Supplier power is the converse of buyer
power.
Cost leadership
Competitive Porters 3
Advantage generis Differentiation
strategies
Focused
strategies
Relationship
between business
process and value
chain
1. Cost Leadership
2. Differentiation
Broad Cost
Market Differentiation
Leadership
Competitive
Scope
Narrow
Market Focused Strategy
Cost leadership strategy Differentiation strategy
H YUNDAI AUDI
Broad BCL strategy BD
market low cost DIFF. $
KIA HUMMER
FCL strategy FD
Focused
market low cost
Rivalry among
existing
competitors
Cost leadership
Porters 3
Competitive
generis
Advantage Differentiation
strategies
Focused
strategies
Relationship
between business
process and value
chain
Supply Chain - a chain or series of
processes that adds value to product &
service for customer.
Marketing
Inbound Outbound Customer
Operations and
Logistics Logistics Service
Sales
Threat of new
entrants
Supply chain Demand Chain
Buyer power
Technology Development (4.2%)- CAD
Procurement of Resources(27%)- EDI with suppliers Value
added
Receive & Service
Make the Deliver
Store raw Market & After
P/S the P/S
material Sell Sale
40.3% 6.6%
5.2% 4.3% 2.2%
Threat of substitute
product or services
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