TUTORIAL CHAPTER 2
Good Luck!
True/False:
1. A competitive advantage is typically temporary, unless its a first
mover advantage.
Answer : TRUE
2. An entry barrier is typically used to influence the threat of new
entrants.
Answer : TRUE
3. Switching cost are typically used to influence the threat of substitute products or services.
Answer : TRUE
4. The Five Forces Model helps to determine the relative attractiveness of an industry.
Answer : FALSE
5. Organizations can add value by offering lower prices or by competing in a distinctive way.
Answer : FALSE
6. An entry barrier is typically used to influence the rivalry among existing competitors.
Answer : FALSE
7. Competitive advantage occurs when an organization can significantly impact its market share by being first to market with a
an advantage.
Answer : TRUE
8. Buyer power, supplier power, threat of products or services, threat of new entrants and rivalry among existing competitors are all included in Porter's Five Forces Model.
Answer : TRUE
9. Switching costs are typically used to influence the threat of substitute products or services.
Answer : FALSE
10. Long Essay.
1. Describe three (3) Porter Generic Strategies. Support your answer with examples. (12 marks)
- Cost Leadership
Becoming a low cost producer in the industry allows the company to lower prices to customers. Competitors with higher costs cannot afford to compete with the low cost leader on price.
- Differentiation
Create competitive advantage by distinguishing their prodcts on one or more features important to their customers. Unique features or benefits may justify price differences and stimulate demand.
For example is i-Care by Proton.
- Focused strategy
target to a niche market and concentrate on either cost leadership or differentition.
(20 marks)
- Buyer Power
High when buyers 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 information technology based on loyalty program in travel industry .
For example is rewards on freeairline tickets or hotel stays.
- Supplier power
High when buyers have few choices of whom to buy from and by the way low when their choices are many. The best practices of information technology (IT) to create competitive advantage.
For example , B2B market place is private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid.
- Threat of subtitute products and services.
high when there are many alternatives to a product or services and low when there are few alternatives from which to choose. Ideally, an organization would like to be on a market in whic there are few subtitutes of their product or services. The best practices of information technology (IT).
For example is electronic product same function different brands.
- Threat of a new entrants.
The force is high when it is easy for new competitors to enter a market and have low when there are significant entry barriers to entering a market. Entry barriers is a product or services feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive. This force also best practices of information technology (IT).
The force have example like new bank must offers online paying bills.
- Rivalry among existence competitors.
High when competition is fierce in a market and low when competition is more complacent and the best practices if information technology (IT). Walmart and its suppliers using Information Technology enabled system for communication and track product at aisles by effective tagging system. Reduce cost by using effective supply chain.
- Buyers power
- Supplier power
- Threat of subtitute products and services.
- Threat of a new entrants
- Rivalry among existence competitors.
