Competitive advantage and value creation
The value chain and competitive advantage. understanding business processes
Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate. A value chain is a set of activities that an organization carries out to create value for its customers. University of Cambridge. For the book publisher's sales and marketing activity, this might include proofreading and editing advertisements. Rather, it is a system of interdependent activities that are related by linkages within the value chain. For example, procurement supports operations with certain activities, but it also supports marketing and sales with other activities. Value Creation The firm creates value by performing a series of activities that Porter identified as the value chain. People are a significant source of value, so businesses can create a clear advantage with good HR practices. Discovering the core competencies of your organisation It is important to be able to specifically and accurately identify the core competencies of your organisation, because it is the core competencies that are almost always the precursors for creating sustained competitive advantage. Operations Once the required materials have been collected internally, operations can convert the inputs in the desired product. Suppliers have a value chain upstream value that create and deliver the purchased inputs. Step 2 — Identify subactivities for each support activity.
Step 3 — Identify links Find the connections between all of the value activities you've identified. How can Activated Logic help?
Value chain analysis in strategic management pdf
It allows a more structured approach of assessing where in the organization true value is created and where costs can be reduced in order to boost the margins. Support Activities These activities support the primary functions above. Elements in Porter's Value Chain Rather than looking at departments or accounting cost types, Porter's Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers. Operations — These are the transformation activities that change inputs into outputs that are sold to customers. Firm Infrastructure Firm infrastructure consists of a number of activities including general strategic management, planning, finance, accounting, legal, government affairs and quality management. Decisions made in one value activity e. This landmark work covers: The 10 major drivers of the firm's cost position Differentiation with the buyer's value chain in mind Buyer perception of value and signals of value How to defend against substitute products The role of technology in competitive advantage Competitive scope and its impact on competitive advantage Implications for offensive and defensive competitive strategy Competitive Advantage makes these concepts concrete and actionable. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization. Minimizing information technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation. The array of technology used in most companies is very broad.
Indirect activities allow direct activities to run smoothly. Service — These are the activities related to maintaining the value of your product or service to your customers, once it's been purchased.
Value chain analysis and competitive advantage pdf
Technological development — These activities relate to managing and processing information, as well as protecting a company's knowledge base. Consequently, a company also needs to optimize these linkages in order to achieve competitive advantage. The dotted lines reflect the fact that procurement, technology development and human resource management can be associated with specific primary activities as well as support the entire value chain. Discovering the core competencies of your organisation It is important to be able to specifically and accurately identify the core competencies of your organisation, because it is the core competencies that are almost always the precursors for creating sustained competitive advantage. Activated Logic is able to provide a systematic and independent assessment of your organisations core strengths and competencies — the findings are essential for many different functions in your business planning, ranging from fundamental strategy formulation to stakeholder engagement Understanding and engaging key stakeholders. Outbound Logistics After the final product is finished it still needs to finds it way to the customer. All five activities are directly involved in the production and selling of the actual product. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization. In addition, many products pass through the value chain of channels channel value on their way to the buyer. Infrastructure — These are a company's support systems, and the functions that allow it to maintain daily operations. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members. Operations — These are the transformation activities that change inputs into outputs that are sold to customers. Elements in Porter's Value Chain Rather than looking at departments or accounting cost types, Porter's Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers. Unfortunately these linkages are often very subtle and go unrecognized by the management thereby missing out on great improvement opportunities.
To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors. A systematic way of examining all of these internal activities and how they interact is necessary when analyzing the sources of competitive advantage.
It rightfully has earned its place in the business strategist's core collection of strategy books. Technology development activities can be grouped into efforts to improve the product and the process.
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