Chapter Two: Identifying Competitive Advantages Review Questions
What are the components of Porter's Five Forces Model?
1. Rivalry among Existing Competitors: the power of competitors 2.Threat of Substitute Products or Services: the power of customers to purchase alternatives 3.Threat of New Entrants: the power of competitors to enter a market 4. Buyer Power: the power of customers to drive down prices 5.Supplier Power: the power of suppliers to drive up prices of materials
Potential External Opportunities are:
Need to identify all significant trends along with how the organization can benefit from each, including new markets, additional customer groups, legal changes, innovative technologies, population changes, and competitor issues
What is the role Porter's Five Forces Model plays in decision making?
Porter's Five Forces Model analyzes the competitive forces within the environment in which a company operates to assess the potential for profitability in an industry. Its purpose is to combat these competitive forces by identifying opportunities, competitive advantages, and competitive intelligence. If the forces are strong, they increase competition; if the forces are weak, they decrease competition. Companies use the five forces model to evaluate the attractiveness of an industry
The competitive advantage is to:
-target high value-adding activities to further enhance their value -target low value-adding activities to increase their value -perform some combination of the two
Potential Internal Weaknesses are:
Harmful Need to identify all key areas that require improvement. Weaknesses focus on the absence of certain strengths, including absence of an Internet marketing plan, damaged reputation, problem areas for service, and outdated technology employee issues.
Potential External Threats are:
Harmful Need to identify all threats of risks detrimental to your organization, including new market entrants, substitute products, employee turnover, differentiating products, shrinking markets, adverse changes in regulations, and economic shifts.
Potential Internal Strengths are:
Helpful Need to identify all key strengths associated with the competitive advantage including cost advantages, new and/or innovative services, special expertise and/or experience, proven market leader, and improved marketing campaigns
How can a company use Porter's value chain analysis to measure customer satisfactions?
A value chain analysis is a useful tool for determining how to create the greatest possible value for customers. The value chain groups a firm's activities into two categories: 1. primary value activities, which acquire raw materials, and manufacture, deliver, market, sell, and provide after-sale service 2. support value activities that include firm infrastructure, human resource management, technology development, and procurement. Examining the firm as a value chain allows managers to identify the important business processes that add value for customers and then find MIS solutions that support them. Conducting a customer survey about the extent to which they believe each activity adds value to the product or service generates responses the firm can measure
What are Porter's three generic strategies and why would a company want to follow only one?
1. Broad Cost Leadership 2. Broad Differentiation 3. Focused Strategy Trying to be all things to all people is a recipe for disaster, since doing so makes it difficult to project a consistent image to the entire marketplace. For this reason, Porter suggests adopting only one of the three generic strategies
List the four support value activities and their responsibilities
1. Firm infrastructure: includes the company format or departmental structures, environment, and systems 2. Human resource management: provides employee training, hiring, and compensation 3. Technology development: applies MIS to processes to add value 4. Procurement: purchases inputs such as raw materials, resources, equipment, and supplies
List the five primary value activities and their responsibilities.
1. Inbound logistics: acquires raw materials and resources and distributes to manufacturing as required 2. Operations: transforms raw materials or inputs into goods and services 3. Outbound logistics: distributes goods and services to customers 4. Marketing and sales: promotes, prices, and sells products to customers 5. Services: provides customer support after the sale of goods and services
What are the four common tools managers use to analyze competitive intelligence and develop competitive advantages?
1. SWOT Analysis 2. The Five Forces Model 3. The Three Generic Strategies 4. Value Chain Analysis
What is the relationship between a business strategy and stakeholders?
A business strategy is a leadership plan that achieves a specific set of goals or objectives such as increasing sales, decreasing costs, entering new markets, or developing new products or services. A stakeholder is a person or group that has an interest or concern in an organization. Stakeholders drive business strategies, and depending on the stakeholder's perspective, the business strategy can change.
How could a company use switching costs to lock in customers and suppliers?
A company can use switching costs to lock in customers and suppliers by making it more attractive for customers/suppliers to buy from them than from their competition. One way to do this is by manipulating costs to make customers/suppliers reluctant to switch. The more painful it is for a customer to switch suppliers, the less likely they are to switch
How could a company use loyalty programs to influence buyer power?
Loyalty programs rewards customers based on the amount of business they do with a particular organization. Examples: frequent flyer miles, grocery store discounts, coffee clubs (where you get your 10th cup free)
When would you use a SWOT analysis to help you make business decisions?
To evaluate a project position To identify significant influences that work for or against business strategies and used to evaluate an organization's strengths, weaknesses, opportunities, and threats
