nonquantitative planning reduction systems * Teleconferencing By performing these activities, enterprises create value for their customers. The ultimate value an enterprise creates is measured by the amount customers are willing to pay for its product or services. A firm is profitable if this value exceeds the collective cost of performing all of the required activities. To gain competitive advantage over its rivals, a firm must either provide comparable value to the customer, but perform activities more efficiently than its competitors (lower cost), or perform activities in a unique way that creates greater buyer value and commands a premium price (differentiation). Exhibit 3: Porter's Four Generic Strategies(Porter 1980) Many differentiation bases exist, classified into four major groups (Borden 1964, quoted in Wiseman 1988): product (quality, features, options, style, brand name, packaging, sizes, services, warranties, returns); price (list, discounts, allowances, payment period, credit terms); place (channels, coverage, locations, inventory, transport); and promotion (advertising, personal selling, sales promotion, publicity). IT can be used to support or sharpen the firm's product through these various attributes. Of especial importance is 'product differentiation'. This is the degree to which buyers perceive products from alternative suppliers to be different, or as it is expressed by economic theory, the degree to which buyers perceive imperfections in product substitutability. The buyers of differentiated products may have to pay a price when satisfying their preference for something special, in return for greater added-value. The connection between the producer and buyers may be reinforced, at least to the level of customer loyalty, and perhaps to the point of establishing a partnership between them. Such a relationship imposes 'switching costs' on the buyer, because its i...
