Identifying competitive advantage

What is competitive advantage?

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

• But, CA is temporary because competitors keep duplicate the strategy.

• Then, the company should start the new competitive advantage.

Michael Porter, a university professor at Harvard Business School, identified the following pressures that can hurt potential sales :-

> Knowledgeable customer can force down prices by pitting rivals against each other

> Influential suppliers can drive down profits by charging higher prices for supplies.

> Competition can steal customers.


> New market entrants can steal potential investment capital.

> Substitute products can steal customers.


The Five Forces Model

> This is useful tool to aid organization in challenging decision whether to join a new industry or industry        segment.

• 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.

         >  Best practices of IT-based
         
         *.Loyalty program in travel industry ( e.g. rewards on free airline tickets or hotel stays)

• Supplier Power.

         > High -  when buyer 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 pose 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.

• Threat of substitute products and 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 service.

        * Best practices of IT

        * E.g. Electronic product - same function different brands.

• 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 entering organization to                 compete and survive.

         > Best practice of IT.

         * E.g. new bank must offers online paying bills, acc monotoring to complete.

• Rivals among existence competitors.

         >  High - when competition is fierce in a market.

         > Low - when competition is more complacent.

        > Best practices of IT

        * Wal- mart and its suppliers using IT - enabled system for communication and track product at aisles              by effective tagging system.

        * Reduce cost by using effective supply chain.


The value chains - targeting business processes.

• Supply chain -  a chain or series of processes that adds value to product and service for customer.

• Add value to its products and services that support a profit margin for the firm.

What is Business Driven Technology?

Information technology is everywhere in business. Most of working process are related with technology in order to fulfill their goals.

Information technology's impact on business operations in common departments in and organization :

1. Accounting
2. Finance
3. Human Resources
4. Sales
5. Marketing
6. Production Management
7. Operations Management
8. Management Information Systems

Organizations typically operate by functional areas or functional silos. In other words, they are working together. Functional areas are interdependent.

Information technology (IT) - a field concerned with the use of technology in managing and processing information. It is also important for business success and innovation.

Management information systems (MIS) - a general name for the business function and academic discipline covering the application of people, technology and procedures to solve business problems. MIS is a business function, similar to accounting, finance, operations and human resources.

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.

People use this IT resources in their working process. This information technology to work with other people and to gain or spread the information.

IT Cultures such as :

1. Information functional cultures - 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 managers input each time a new sales sales strategy is developed
2. Information sharing cultures - employees across departments trust each other to use information to improves performance.
3. Information inquiring cultures - employees across departments search for information to better understand the future and themselves with current trends and new directions.
4. Information discovery cultures - employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.