(No Ratings Yet)
Loading ...Value chain analysis or value chain, both refer to the same concept. This concept of value chain analysis was put forward initially by Michael Porter in 1985. This concept relates to business management. It entitles all the niche activities and the strategies, carried out to value the customer. This concept was deduced to develop sustainable competitive advantages for an organization within the business arena of the present epoch. It helps us understand how different services within an organization and values added to them. It is pretty necessary because every organization is a conglomeration of certain set of activities that altogether by linking up together, add value to the business and moreover, altogether these form the organization’s value chain. The activities may include the buying of products, the distribution, the marketing activities etc. The value chain analysis model is served as one of the most powerful strategic tools for the strategic internal planning of an organization.
The activities which the value chain analysis focuses on, relate to primary activities such as the operations, inbound logistics, outbound logistics, sales and marketing, and services respectively. Other than the primary activities, the support activities include the human resource management, R & D, administrative infrastructure management and the procurement.
Each of these mentioned activities is a chain, which a firm in a specific industry takes out. A product or a service passes through the entire chain of activities and thus gaining more value as this chain of activities nourishes the product through more added values. It is necessary for the managers to carry out value chain analysis for an organization to draw a competitive advantage with sustained company repute. This competitive advantage over the other competitors is the ability to perform all the activities along with the value chain.
It is feasible for a company to understand its capabilities in accordance with the needs of the customers in order to make the competitive strategy successful. The company tends to be more profitable provided if the activities within the value chain are effectively and efficiently managed in such a way that the price which the customer pays for any product or a service exceeds the relative costs of the activities carried out in within the value chain. Though this theory is pretty easy to understanding, but quite time consuming when practiced.
The first step in conducting a value chain analysis for an organization is to break up all the activities which are carried out within the organization and which are entailed in a similar framework. After that, the assessment is carried out in order to check the potential for adding certain values like cost/ differentiation etc. and lastly, the analyst determines the pertinent strategies that altogether serve in enabling the company to achieve a sustainable competitive advantage.
The value chain analysis model is used by the companies in order to identify and understand the crucial aspects with respect to the internal competitive strengths and external market competencies. The model also highlights that how the value chain activities are linked together to create value for the buyer at the end.
(No Ratings Yet) Loading ...
Great article. I found this article very informative and enkoyed reading it.