explain how value chain analysis can be used to make a firm more competitive course hero

How does value chain analysis help to achieve competitive advantage?

To achieve competitive advantage, an organization ultimately delivers more value at an equal or lower cost. Value chain analysis is the method for determining the critical path to enhance customer value while reducing costs.

What is the difference between primary activities and value chain analysis?

On the other hand, primary activities are usually the source of cost advantage, where costs can be easily identified for each activity and properly managed. Value chain analysis is based on the principle that organisations exist to create value for their customers.

What are some examples of companies using value chain analysis?

There are many examples (like Toshiba and Sharp) that consider Value Chain Analysis as a tool to get a competitive advantage and invest heavily in research and development activities within their value chain network.

How can KFC obtain a competitive advantage from value chain analysis?

KFC can obtain a competitive advantage from one or both sources, depending on the depth and breadth of its Value Chain Analysis. Next parts of the article present in detail how KFC can configure primary and/or secondary value chain activities to achieve the desired cost and differentiation objectives.

How does a value chain analysis help a firm gain competitive advantage?

When a firm takes into account its value chain, it needs to consider its value proposition, or what sets it apart from its competitors. Value chain analysis is designed to improve profits by creating a product or service that is so superior that customers are willing to pay more than the cost to develop it.

How can value chain analysis be used to maintain competitive advantage?

Your value chain analysis will help you identify areas for improvement and the activities that provide the most value to your customers and your business as a whole. Eliminating inefficient business activities speeds up production, improves your competitive advantage, and increases profit margins.

Why value chain analysis is needed to determine a competitive position?

A value chain analysis helps decision-makers understand which activities are most valuable and which ones could be optimized (perhaps even eliminated through technology and automation) to give the business a competitive advantage.

How can a value chain analysis be used to improve the performance of the business?

Through value chain analysis, you can evaluate primary and secondary business functions and identify ways to improve efficiency, increase value and stand out from the crowd. This includes breaking down company logistics, operations and firm infrastructure to reveal the true value of a product or service.

What is competitive advantage and explain about value chain?

Competitive advantage in either cost or differentiation is a function of a company's value chain. A company's cost position reflects the collective cost of performing all its value activities relative to rivals. Each value activity has cost drivers that determine the potential sources of a cost advantage.

What is value chain analysis What does the firm gain by successfully using this tool?

Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage.

What is the purpose of a value chain analysis?

Value chain analysis is a means of evaluating each of the activities in a company's value chain to understand where opportunities for improvement lie. Conducting a value chain analysis prompts you to consider how each step adds or subtracts value from your final product or service.

What are the advantages of value chain analysis?

Advantages of Value Chain Analysis With value chain analysis, you can easily identify those activities where you can quickly reduce cost, optimize effort, eliminate waste, and increase profitability. Analyzing activities also gives insights into elements that bring greater value to the end user.

How can value chain analysis help identify company's strengths and weaknesses?

Value chain analysis identifies the separate activities and business processes that are performed from the designing of a product to supporting it. Value chain analysis is viewed as a means of evaluating a firm's strengths and weaknesses. It assumes that a firm's basic economic purpose is to create value.

How does value chain enhance customer value?

Value is key to business success. Delivering value to customers = Increased acquisition, retention and advocacy, and delivering value to the business = Better margins and increased profitability.

What is value chain analysis What are the steps in value chain analysis?

Five steps for value chain analysis. 1) Collect the raw data and information; 2) Identify entities and process functions; 3) Connect the entities and functions; 4) Value the links in the chain; and.

How the value chain model can be used to identify opportunities for information systems?

How do the value chain and value web models help businesses identify opportunities for strategic information system applications? The value chain model highlights specific activities in the business where competitive strategies and information systems will have the greatest impact.

How can value chain analysis help identify a company's strength and weaknesses?

Value may include providing quality products and services and exemplary customer service, in a timely manner, at reasonable prices. You can use value chain analysis to ensure that each business activity you are involved in creates value for your customers and to help identify your company's strengths and weaknesses.

What are the advantages of value chain analysis?

Advantages of Value Chain Analysis With value chain analysis, you can easily identify those activities where you can quickly reduce cost, optimize effort, eliminate waste, and increase profitability. Analyzing activities also gives insights into elements that bring greater value to the end user.

What is the use of value chain analysis?

A value chain is a business term describing the full range of iterative activities a company uses to create a product or a service. The purpose of value-chain analysis is to increase production efficiency so that a company can deliver maximum value for the least possible cost.

Does Porter's value chain helps in achieving competitive advantage of a firm?

Porter [1] suggests that value chain analysis can be a useful approach in developing strategy. Value chain analysis can be used to formulate competitive strategies, understand the source(s) of competitive advantage, and identify and/or develop the linkages and interrelationships between activities that create value.

What is value chain analysis?

Value chain analysis is a way to visually analyze a company's business activities to see how the company can create a competitive advantage for itself. Value chain analysis helps a company understands how it adds value to something and subsequently how it can sell its product or service for more than the cost of adding the value, ...

What is value in accounting?

Value is the total amount (i.e. total revenue) that buyers are willing to pay for a firm's product. The difference between the total value and the total cost performing all of the firm's activities provides the margin .

Why are primary activities important?

As mentioned before, primary activities add value directly to the production process, but they are not necessarily more important than support activities. Nowadays, competitive advantage mainly derives from technological improvements or innovations in business models or processes.

What is the ability for a firm to put "generic strategy" into practice?

Competitive Advantage is the ability for a firm to put "generic strategy" into practice, generic strategy includes: Differentiation: selecting the important attributes that buyers want so the company can get a premium price. What activities a business undertake is directly linked to achieving competitive advantage.

What is the purpose of marketing mix?

Marketing must make sure that the product is targeted towards the correct customer group. The marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target group through the promotional mix.

What is value chain analysis?

Value chain analysis is a handy management tool which identifies the activities that go into creating a superior product or service that is highly valued by customers. The outcome of creating this highly valued product is that customers are willing to pay a premium, which exceeds its costs, thereby delivering higher profit.

Who created the value chain model?

Back in 1985, Michael Porter, a Harvard Business School professor, introduced a basic value chain model in his book The Competitive Advantage: Creating and Sustaining Superior Performance . He identified several key steps common among all value chain analyses and determined that there are primary and supporting activities ...

What is client relationship management?

Service (client relationship management) – responsible for providing all the touch points to the client. Support activities include: Technology – designs a trading and client module that is efficient and effectively allows the team to provide the highest level of service and make the best investment decisions.

What is the role of investment team?

Investment team (portfolio managers, analysts) – tasked with making the investment decisions. Operations and traders – tasked with ensuring the investments are in line with the guidelines set forth by the client, and the trades are at the best execution price. Marketing and sales – responsible for procuring clients.

Why is value chain analysis important?

Performing a value chain analysis enables you to break down company logistics, operations and infrastructure to reveal the true value of a product or service. It can also help you uncover a competitive advantage you have over rival businesses.

What is competitive advantage after value chain analysis?

After conducting a value chain analysis, you’ll be able to identify value gaps in your operations, products and services. It’s at this stage that you can carve out your competitive advantage and establish measured goals that align with your desired outcome.

Why is it important to evaluate sales pipeline?

Evaluating your sales pipeline is one of the most important parts of value chain analysis for a sales team. It can help you streamline your processes, increase market value, pull in more revenue and boost profits.

How can companies increase their profits?

According to Porter, companies can increase their profits by using value chain analysis in two different ways: Cost leadership: Cutting production costs and streamlining processes in order to increase profitability. Competitive differentiation: Increasing perceived value by offering a unique or highly valued service.

What are the two levels of value chain analysis?

To conduct a value chain analysis, businesses need to split the chain into two levels: Primary activities. Supporting activities. A primary activity is anything that directly impacts the input, output or distribution of products or services. These activities include:

What is performance benchmarking?

Performance benchmarking: Comparing outcomes, such as revenue, organic traffic, social media performance, reviews and ratings and so on. First, you need to determine your competitive benchmarking goals; then, you can conduct research, make a comparison and determine value.

Who created the value chain?

The term value chain analysis was coined in 1985 by Michael Porter, a Harvard Business School professor. His book “ Competitive Advantage ” introduced the basic concept, outlining how businesses can identify primary and supporting activities and create value for their customers. Porter’s argument was that if the value a company was offering its ...

What is value chain analysis?

To achieve competitive advantage, an organization ultimately delivers more value at an equal or lower cost. Value chain analysis is the method for determining the critical path to enhance customer value while reducing costs.

Why is value chain analysis important?

Value chain analysis is more than a straightforward cost-to-profit model. It expands on the principles of economies of scale and capacity.

What should be studied in reimagining the value chain?

In reimagining the basic value chain, you should also study rapid technological advances. The Consumer Goods Forum Board findings recognize that the consumer is now more involved in product development. And, as society onboards new and unknown technologies, value chains need to be continuously reengineered.

What companies use global value chains?

Companies like FedEx see the future as a circular chain that values renewability. The World Bank, the United Nations Conference on Trade Development, and the International Crops Institute for the Semi-Arid Tropics all use global value chains to foster international cooperation to assist the world's poorest countries.

What are Porter's generic strategies?

However, Porter’s generic model identifies three general steps in value chain analysis: the initial evaluation of tasks, the location of areas of cross-functionality, and the discovery of dynamic areas of opportunity. For extensive strategies and actionable guidance to support or begin a process of value chain management, consult Michael Porter's book, Competitive Advantage .

What is the first order of value chain?

Therefore, the first order of any value chain strategy is to identify the important tasks and functions necessary to deliver your product or service. Once you identify value activities, you can then focus analysis on where you can add value and discover areas for optimization, differentiation, or cost efficiency.

What is value chain?

A value chain refers to the activities that take place within a company in order to deliver a valuable product to market. The value chain system was first described in Tableau Economique, written in the 18th century by the French economist Francois Quesnay.

What is value chain analysis?

By conducting the Value Chain Analysis of KFC during the planning process, possible sources of competitive advantage can be identified. The firm/company is a collection of different activities that share relatedness to some extent. KFC cannot trade all activities in the external market. The Value Chain approach suggests that a company can consider these activities as economic rent sources. These activities can also act as barriers to new entrants or cause cost disadvantages to competitors.

What is Porter's value chain?

Porter's value chain model is highly popular in the business world. However, KFC must not take it as a rigid, standalone framework by assigning the equal importance to all activities. The effective Value Chain Analysis requires KFC to realise that all activities or functions do not require same scrutiny level. Hence, the first step of adapting the Porter Value Chain framework is to identify the importance of activities according to their role in product/service delivery process.

How does KFC gain differentiation?

KFC can obtain the differentiation advantage by analysing different value chain activities. For instance, a company can procure the unique and valuable inputs that are not easily available to competitors. KFC can either reconfigure the whole value chain or change individual entities to set the differentiation basis.

What can KFC use to make a strong differentiation?

KFC can either use the operations, marketing and other relevant value chain activities to avail the cost advantages or it can use the human resource, technology, infrastructure, service or other relevant activities to set the strong differentiation basis.

How does KFC manage human resources?

KFC can analyse human resource management by evaluating different HR aspects, including- recruiting, selecting, training, rewarding, performance management and other personnel management activities. The effective HR management can allow KFC to reduce competitive pressure based on motivation, commitment and skills of its workforce. The company can also achieve its cost minimisation objectives by analysing hiring and training costs with their relative return. The heavy dependence of KFC on employees' talent will increase the importance of this value chain support activity.

Why is KFC important?

The pre-sale and post-sale services offered by the KFC will play an important role in developing customer loyalty. The modern customers consider post-sale services as important as marketing and promotional activities. The power of negative e-WOM due to poor support service cannot be undermined in the current technologically advanced era. The company must analyse its support activities to avoid damaging brand reputation, and instead use it as a tool to spread positive word of mouth due to quick, timely and efficient support services.

What is the primary value chain of KFC?

The primary value chain activities of KFC are directly involved in producing and selling the product to targeted customers. Analysis of primary value chain activities can improve the performance of KFC as explained below.

Why is value chain analysis important?

The concept of value chain analysis helps business managers to better identify useful and wasteful activities. By looking beyond standard means of efficiency analysis while also seeking to integrate and capture value chain analysis in business metrics, stakeholders can make important insights related to operational processes.

What is value chain?

Value Chain Basics. In general, value-chain business activities are usually divided into primary activities and secondary activities. The primary activities are directly related to the creation of a good or service.

What is Starbucks' signature retail objective?

A signature retail objective of Starbucks has always been to provide customers with a unique Starbucks Experience. Service training is a key component of the value chain that helps to make its offerings unique. A substantial amount of value is created when baristas make drinks for customers.

Why is profit margin less important in value chain analysis?

The profit margin can be less important to value chain analysis because it focuses on a company’s capital expenditures, taxes, and investment activities, which play less of a part in value chains and supply chains. Broadly, the more value a company can create in relation to gross margin and operating margin, the more value it can generate ...

Why is Starbucks a committed company?

The committed workforce is considered a key attribute in the company’s success and growth over the years. Starbucks employees are motivated through generous benefits and incentives. The company is known for taking care of its workforce, a key reason for a low turnover of employees, which indicates great human resource management. There are many training programs conducted for employees in a setting of a work culture, which keeps its staff motivated and efficient.

How does Starbucks add value to their coffee?

Value is added to the beans through Starbucks’ proprietary roasting and packaging, which helps to increase their selling value. The beans are then sent to distribution centers, a few of which are company-owned and some of which are operated by other logistic companies.

Does Starbucks have a need based marketing strategy?

However, need-based marketing activities are carried out by the company during new product launches in the form of sampling in areas around the stores.

What is supply chain?

The supply chain is complex, integrated with and impacting every facet of the business. Even an experienced supply chain manager needs to lean on departmental and team experts to maximize all aspects of the supply chain. Some considerations include:

What is the function of supply chain?

Your supply chain’s primary function is to take your products from creation to delivery, but it can also provide you a competitive advantage within your industry and with your customers. From start to finish, your supply chain offers opportunities to spearhead innovation, maximize organizational savings, boost company profits, ...