IT in Business - Chapter 2

After completing this topic , I had learn why competitive advantages are typically temporary , I am able to list and explain the five forces in porter’s five forces model , compare porter’s three generic strategic and describe the relationship between business processes and value chain . 

 Competitive Advantage :

 PORTER'S FIVE FORCES MODEL

Micheal Porter’s Five Forces Model is useful tool to aid organization in challenging decision wheter to join a new industry or industry segment

*Rivalry among existing competitiors

• High - when competition is fierce in a market
• Low - when competition is more complacent 
• Best practice of IT - Wal-MArt and its suppliers using IT-enabled system , Reduce cost by using effective supply chain

*Buyer Power

• High - buyers have few choices of whome to buy from
• Low - .when their choices are few to reduce buyer power , an organization must  ,make it more attractive to buy from company not from competitors . eg. rewards on free airline ticket or hotel stays 

 *Supplier power

• High - buyers have few choices of whom to buy from 
• Low -  when their choice are many the best practices of IT to create competitive advantage . eg . private exchange allow a single buyer to posts it needs and then open the bidding to any supplier would care

*Threat of new entries

• High - it easy for new competitors to enter a market 
• Low - when there are significant entry barriers to entering a market. eg. new bank must online paying bills. 

*Threat of substitute product

• High - there are many alternatives to a product or service. 
• Low - there are few alternatives from which to choose 
• An organization would like to be on a market in which there are few substitutes of their product
• eg . electronic product 

THE THREE GENERICS STRATEGIES 

1 . Cost Leadership 

• Becoming a low-cost producer in the industry 
• Competitors with higher costs cannot afford to compete with the low-cost leader on price

2 . Differentiation 

• Create competitive advantages by distinguishing their product
• Unique features or benefits my justify price differences 
• eg . i-care by proton

3 . Focused strategy 

• Target to a niche market 
• concentrates on either cost leadership or differentiation

RELATIONSHIP BETWEEN BUSINESS PROCESS AND VALUE CHAIN

The Value Chain - Targeting Business Process 

• Supply Chain - a chain or series of processes that adds value to product & services for customer .
• Add value to its products and services that support a profit margin for the firm .