Chapter 2 

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.

§Unfortunately, CA is temporary because competitors keep duplicate the strategy.

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

Introduction

¡ Michael Porter’s Five Forces Model 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) 

The competitive Environment

Bargaining Power of Customers/Buyer power.

oCustomers can grow large and powerful as a

 result of their market share. 

oMany choices of whom to buy from

oLow when comes to limited items

oE.g.: used loyalty programs (jusco card, 

tesco card, - being a members to get the 

discount)

Supplier Power

¡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.

An organization within the supply chain.

¡Supplier power is the 

converse of buyer power.