ANSWER MGT300 CHAPTER TWO

ANSWER :

True/False:

1. A competitive advantage is typically temporary, unless its a first-mover advantage.  (FALSE)

2. An entry barrier is typically used to influence the threat of new entrants. (TRUE)

3. Switching cost are typically used to influence the threat of substitute products or services.(TRUE)

4. The Five Forces Model helps to determine the relative attractiveness of an industry.(FALSE)

5. Organizations can add value by offering lower prices or by competing in a distinctive way.(TRUE)

6. An entry barrier is typically used to influence the rivalry among existing competitors. (FALSE)

7. Competitive advantage occurs when an organization can significantly impact its market share by
    being first to market with a an advantage. (FALSE)

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. (TRUE)

9. Switching costs are typically used to influence the threat of substitute products or services. (TRUE)

10.

Long Essay.

1. Describe three (3) Porter Generic Strategies. Support your answer with examples. (12 marks)

                    The three Porter Generic Strategies is broad cost leadership,broad differentiation and focused strategy.

                     Firstly is broad cost leadership. Broad cost leadership is broad strategies reach a large market segmentation.The firm can compete on the price with every other industries and earn higher units profit.Cost reduction provides the focus of the organisation's strategy.For example Wal-Mart.Walt-malt is to keep retail price low and the company has been very successful at this.

                     Second is broad differentiation. Broad differentiation is focused strategies target a niche market.Customers perceive the product to be different and better than that of rivals. Differentiation can be based on product image or durability,after-sales,quality,additional features.For example Mc Donald's. Mc Donald's strove to meet a customer wait time at no more than one minute in line and 30 second at the counter.

                    Third is focused strategy. Focused strategy is concentrate on either cost leadership or differentiation.A firm using a focus strategy often enjoys a high degree of customer loyalty,and this entrenched loyalty discourages other firms from competing directly. For example, food and beverages(PEPSICO).

2. Porter's Five Forces Model is a one of common tools used in industry to analyze and develop
    competitive advantages. List and describe each of the five (5) forces in Porter's Five Forces
    Model.                                                                                                                                 (20 marks)

    Five(5) forces in Porter’s five forces:

    1) Threat of substitute products or service

    2) Buyer power

    3) Threat of new entrants

    4) Supplier power

    5) Rivalry among existing competitors

                                First is buyer power. Buyer power is high when buyers have many choices of whom to buy  from and low when their choices are few. For example, cement industry. The number of players in this industry is relatively small so that the customers does not have a strong bargaining position.

                                Secondly is supplier power. Supplier power is high when buyers have few choices of whom to buy from and low when their choices are many. For example, lack of bargaining power of supplier is Carrefour. With its brand equity, Carrefour can easily switch supplier if his raise prices because there are many other supplier entering.

                                Thirdly is threat of substitute products or services. This is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose.For example, if the price of coffee rises substantially, a coffee drinker is likely to switch over to a beverage like tea because the products are so similar.

                                Fourth is threat of new entrants. High when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market. For example , of barrier to entry is very large amount of capital to start a business in the industry especially Mining , oil and gas industry .

                             Fifth is rivalry among existing competitors. This is high when competition is fierce in a market and low when competition is more complacent.

3. Michael Porter's Five Forces Model is one of the tools used by the organization to analyze and
    develop competitive advantages. Explain how information technology can develop a competitive
    advantage for each force in Five Forces Model.                                                         (20 marks)