April 2009
Part B
3) What is competitive advantage?
Answer :
D. A product or service that an organization's customers place a greater value
on than similar offerings from a competitor.
4) All of the following are common tools used in industry to analyse and develop competitive advantages, except?
Answer:
.A. Five Forces Model.
Part C
1) Organizations frequently face a decision as to whether to enter a new industry or industry segment. Michael Porter's Five Forces Model is a useful tool to aid in this Challenging decision. List and describe each of the five (5) forces in Porter's Five Forces Model
Answer :
First is buyer power, it is high when buyers have many choice of whom to buy from and low when their choice are few. To reduce buyer power and create competitive competition advantage, an organization must make it more attractive for customers to buy from it than its competition.
Second is Supplier power, it is high when buyers have few choice of whom to buy from and low when there are many choice, It is converse with buyer power. Example, we can see from supplier power is via supply chain where it consist of all parties involved directly or indirectly in the procurement of a product or raw material.
Third is threat of new entrant, it is high when it is easy for new competitors to enter a market and low when there significant entry barriers to enter the market. Entry barrier is a product or service feature that customers have come to expect from organization in a particular industry and must be offered by an entering organization to compete and service. Example, a new bank must offer its customer and array of IT enabled service including ATM use, online banking, sms banking and others.
Threat of substitute product and service is high when there are many alternative to a product or service and low when there are few alternative from which to choose. The organization can create competitive advantage by using switching cost. Switching cost are cost that can make customer reluctant to switch to another product or service.
Last is rivalry among existing competitors, it is high when competition is fierce in a market and low when competition is more complement. The retail grocery industry for example is intensively competitive.
October 2009
Part A
2) Switching costs are typically used to influence the threat of substitute products or services.
Answer: False.
Part D
CASE STUDY : AIRASIA - NOW EVERYONE CAN FLY
AirAsia was established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB-Hicom. On December 2, 2001, the heavily-indebted airline was purchased by former Time Warner executive Tony Fernandes's company Tune Air Sdn. Bhd. for the token sum of one ringgit.
Through the slogan "Now Everyone can Fly", Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27).
AirAsia operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline. AirAsia pioneered low cost travelling in Asia which is then followed by TigerAirways, Jetstar Asia, Nok Air, Lion Air and Cebu Pacific. It is also the first airline in the region to implement fully ticketless travel and unassigned seats.
AirAsia operates with the world's lowest unit cost of US$0.023/ASK(available seat per kilometer) and a passenger break-even load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilisation rate of 13 hours a day.
AirAsia is currently the main customer of the Airbus A320. The company has placed an order of 175 units of the same plane to service its routes. On December 27, 2006, AirAsia's CEO Tony Fernandes unveiled a five-year plan to further enhance its presence in Asia. In the plan, AirAsia will strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India. The airline will focus on developing its hubs in Bangkok and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia.
To date with a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia and has flown over 55 million guests.
1.Identify five (5) of competitive advantages used by AirAsia.
Answer:
Launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27).
i) AirAsia operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline.
ii) He also first airline in the region to implement fully ticketless travel and unassigned seats.
iii ) AirAsia operates with the world's lowest unit cost of US$0.023/ASK(available seat per kilometer) and a passenger break-even load factor of 52%.
iii) AirAsia will strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India
v) AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia and has flown over 55 million guests.
2.Which of the Porter's generic strategies were applied by AirAsia in the case study and explain with examples.
Answer:
Cost strategies. Airasia become a low-cost producer in the industry allow the company to get many customers. Competitors with higher cost cannot afford to compete with the low-cost leader price. Example, Airasia offer promotional fares as low as RM1.
Innovation strategies, Airasia have unique service rather than other airline service. Example, It is the first airline in the region to implement fully ticketless travel and unassigned seats.
3. Based on Porter's Five Force Model, analyze AirAsia's buyer power and supplier power.
Answer:
Buyers power high when buyers have many choices of which to buy from and low when their choice are few. Airasia reduce buyer power by create competitive advantage and make it more attractive for customers to buy from it than from its competition. Example, Airasia offered fully ticketless travel and unassigned seats.
Supplier power high when buyers have few choices of whom to buy from and low when the choices are many. Airasia have a higher supplier power because there are few competitors. Example, AirAsia operates with the world's lowest unit cost of US$0.023. There are few competitors that offer low-cost.
APRIL 2010
PART A
1) 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
PART B
1. What is the acquisition and analysis of events and trends in the environment external to an organization?
Answer :
C) Environmental Scanning
October 2010
Part A
2. 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
3. Switching costs are typically used to influence the threat of substitute products or services.
Answer :
True
Part B
4. Which of the following forces is commonly reduced through the use of a loyalty program?
Answer:
A. Buyer power
Part C
1.a) Describe three (3) Porter Generic Strategies. Support your answer with example.
Answer:
Three porter generic strategies is :
Broad cost leadership.
Producing and marketing a good quality product or service at a lower cost than competitors. This strategy involves the firm winning market share by appealing to cost conscious or price sensitive customers. This is achieve by having the lowest price in the target market segment. To succeed at offering lowest price while still achieving profitability, the firm must be able to operate at a lower cost than its rivals. There are three main ways to achieve this. The first approach is achieving a high asset turnover.
For example a restaurant that turns tables around very quickly. These approach mean fixed costs are spread over a larger number units of the product or service, resulting in a lower unit cost. The second dimension is achieving low direct and indirect operating costs.
This is achieved by offering high volumes of standardized products, offering basic no frills product and limiting customization and personalization of service. The third dimension is control over the supply chain to ensure low costs. This could be achieved by bulk buying to enjoy quantity discount, squeezing suppliers on price, instituting competitive bidding for contracts, working with vendors to keep inventories low using method.
Broad differentiation strategy
A differentiation strategy is appropriate where the target market customer segment is not price sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under served and the firm has unique resources and capabilities which enable to satisfy these needs in ways that are difficult to copy. This could include patents or other Intellectual Property, unique technical expertise ( e.g. Apple’s design skills ), talented personnel ( e.g. a sports team star players ) or innovative processes.
Focus or strategic scope
The scope over which the company should compete based on cost leadership or differentiation. In adopting a narrow focus, the company ideally focuses on a few target markets. This should be distinct groups with specialized needs. The choice of offering low prices or differentiated products/service should depend on the needs of the selected segment and the resources and capabilities of the firm. A focused strategy should target market segments that are less vulnerable to substitutes or where a competition is weakest to earn above average return on investment. Example of firm using this strategy is Southwest Airlines, which provide short haul point to point flights in contrast to the hub and spoke model of mainstream carriers.
APRIL 2011
PART A
Broad cost leadership, broad differentiation and focused group are all include in Porter's Three Generic Strategies.
Answer:
True
The value chain approach views an organization as a series of processes, each of which adds value to the product or service for each customer.
Answer:
False
PART B
What is a competitive advantage?
Answer:
D. A product or service that an organization’s customers place a greater value on than similar offerings from a competitor
SEPT 2011
PART A
Competitive advantage occurs when an organization can significantly impact its market share by being first to market with an advantage.
Answer:
True
Business process is one of the common tools used in the industry to analyze and
develop competitive advantages.
Answer:
False
PART B
What is the business function receiving the greatest benefit from information
technology?
Answer:
D. Customer service
Which of the following is the most common function outsourced?
Answer:
C. Information Technology
PART C
Q1.
Michael Porter's Five Forces Model is one of the tools used by the organization to analyse and develop competitive advantages. Explain how information technology can develop a competitive advantage for each force in Five Forces Model.
Answer:
This model is a useful tool aid in this challenging decision. This model also help determine relative attractiveness of an industry and includes five forces namely buyer power, supplier power, threat of substitutes product or services, threat of new entrants and also rivalry among existing competitors. Buyer Power have many choices of whom to buy from and low when their choices are few such as loyalty programs that many organizer offer. Supplier Power it is also the converse of buyer power such as can see from supplier power is via supply chain where it consists of all parties involved directly or indirectly in the procurement of a product or raw material.
Threat of New Entrance it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market such as a new bank offer its customers and array of IT enabled services including ATM use, online bill paying and Internet banking.
Threat of Substitute Product Services it is high when there are many alternatives to a product and low when there are few alternatives from a which to choose. The organization can create competitive advantage by using switching cost. Switching costs are cost that can make customers reluctant to switch to another product or services.
Rivalry among Existing Competitors it is high when competition is fierce in a market and low competition is more complement such as the retail grocery industry, most of them loyalty programs that give shoppers special discount.
