= A product or service that an organization's customers place a greater value on than similar offerings from a competitor.
The Five Forces Model - Evaluating Business Segment
Buyer power.
* Customers can grow large and powerful as a result of their market share.
* Many choices of whom to buy from.
* Low when comes to limited items.
Supplier power.
Threat of substitute products or services.
* To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.
* Switching cost - costs can make customer reluctant to switch to another product or service.
Threats of new entrants.
* Many threats come from companies that do not yet exist or have a presence in a given industry or market.
* The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.
Rivalry among existing companies.
* Existing competitors are not much of the threat : typically each firm has found its "niche".
* However, changes in management, ownership or, "the rules of the game" can give rise to serious threats to long term survival from existing firms.
Porter's Three Generis Strategies
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 products on one or more features important to their customers.
- Unique features or benefits may justify price differences and/or stimulate demand.
- Target to a niche market.
- Concentrates on either cost leadership or differentiation.
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