Chapter 2 - Identifying competitive advantages. After completing this chapter, students will be able to: Explain why competitive advantages are typically temporary, list and describe each of the five forces in Porter’s Five Forces Model, compare Porter’s three generic strategies, describe the relationship between business processes and value chains. | CHAPTER 2 Identifying Competitive Advantages LEARNING OUTCOMES Explain why competitive advantages are typically temporary List and describe each of the five forces in Porter’s Five Forces Model Compare Porter’s three generic strategies Describe the relationship between business processes and value chains IDENTIFYING COMPETITIVE ADVANTAGES To survive and thrive an organization must create a competitive advantage Competitive advantage – a product or service that an organization’s customers place a greater value on than similar offerings from a competitor First-mover advantage – occurs when an organization can significantly impact its market share by being first to market with a competitive advantage IDENTIFYING COMPETITIVE ADVANTAGES Organizations watch their competition through environmental scanning Environmental scanning – the acquisition and analysis of events and trends in the environment external to an organization Three common tools used in industry to | CHAPTER 2 Identifying Competitive Advantages LEARNING OUTCOMES Explain why competitive advantages are typically temporary List and describe each of the five forces in Porter’s Five Forces Model Compare Porter’s three generic strategies Describe the relationship between business processes and value chains IDENTIFYING COMPETITIVE ADVANTAGES To survive and thrive an organization must create a competitive advantage Competitive advantage – a product or service that an organization’s customers place a greater value on than similar offerings from a competitor First-mover advantage – occurs when an organization can significantly impact its market share by being first to market with a competitive advantage IDENTIFYING COMPETITIVE ADVANTAGES Organizations watch their competition through environmental scanning Environmental scanning – the acquisition and analysis of events and trends in the environment external to an organization Three common tools used in industry to analyze and develop competitive advantages include: Porter’s Five Forces Model Porter’s three generic strategies Value chains THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS Porter’s Five Forces Model determines the relative attractiveness of an industry Buyer Power Buyer power – assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item Ways to reduce buyer power include Switching costs – costs that can make customers reluctant to switch to another product or service Loyalty program – rewards customers based on the amount of business they do with a particular organization Supplier Power Supplier power – assessed by the suppliers’ ability to directly impact the price they are charging for supplies (including materials, labor, and services) Supply chain – consists of all parties involved in the procurement of a product or raw material Threat of Substitute Products or Services Threat of substitute products or .
