Identifying Competitive Advantage

Bismillah..

What is competitive advantage?

A feature of a product or service on which customers place a greater value than they do on similar offerings from competitors.

Competitive advantages provide the same product or service either at a lower price or with additional value that can fetch premium prices.

Unfortunately, competitive advantages are typically temporary, because competitors often quickly seek ways to duplicate them.

Then, the company should start the new competitive advantage.

Below is the Five Force Model in evaluating business attraction :

BUYER POWER

•           The ability of buyers to affect the price they must pay for an item.
• -          High - When buyers have many choices of whom to buy.
• -          Low - When their choices are few.

• -          To reduce buyer power is by manipulating switching costs, costs that make customers reluctant to switch to another product or services.

SUPPLIER POWER

• -     The ability to influence the prices they charge for supplies (including materials, labor, and services)
• -          Supplier power is high when buyers have few choices of whom to buy from.
• -          Supplier power is low when their choices are many.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

• -          High - When there are many alternatives to a product or service
• -          Low -  There are few alternatives from which to choose.
• -      For example, travelers have numerous substitutes for airline transportation including automobiles, trains, and boats. 

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.
• -          An entry barrier is a feature of a product or service that customers have come to expect and entering competitors must offer the same for survival.

RIVALRY AMONG EXISTANCE COMPETITORS

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

In this chapter also explain about the 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.

Unique features or benefits may justify price differences.

FOCUSED STRATEGY

Target to a niche market.

Concentrates on either cost leadership or differentiation.

End of Chapter Two....