True/False:

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

=True

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.

=True

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

=False

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.

=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.

=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)

=Porter Generic Strategies are cost leadership , differentiation , and focused strategy.

Cost Leadership Strategy.This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market.

 Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. Firms that succeed in cost leadership often have the following internal strengths: Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome. Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Efficient distribution channels. Each generic strategy has its risks, including the low-cost strategy. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share.
  Differentiation Strategy.A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily. Firms that succeed in a differentiation strategy often have the following internal strengths: Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product. Corporate reputation for quality and innovation. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments.
  Focus Strategy.The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. Some risks of focus strategies include imitation and changes in the target segments. Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may be able to carve out sub-segments that they can serve even better.

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)


Porter's Five Forces Model is a one of common tools used in industry to analyze and develop competitive advantages.Forces in Porter's Five Forces Model.

Buyer Power: High when the buyers have many choices of whom to buy. Low when their choices are few.

Supplier Power: High when the buyers have few choices of whom to buy from. Low is when their choices are many.

Threat of Substitute Products & Services: High when there many alternatives to a product or service. Low when there are few alternatives from which to choose.

Treat for New Entrants: High when it is easy for new competitors to enter a market. Low when there are significant entry barriers to entering a market.

Rivalry among Existence Competitors: High when competition is fierce in a market. 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)

Competitive rivalry. This force examines how intense the competition currently is in the marketplace, which is determined by the number of existing competitors and what each is capable of doing.

Bargaining power of suppliers. This force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business's profitability.

Bargaining power of customers. This force looks at the power of the consumer to affect pricing and quality.

Threat of new entrants. This force examines how easy or difficult it is for competitors to join the marketplace in the industry being examined.

Threat of substitute products or services. This force studies how easy it is for consumers to switch from a business's product or service to that of a competitor.