Determine the primary activity of the company, and all the support activities performed Look at each activity back to even receiving the inventory, marketing, sales, and after sales support and clearly identify each, and make sure they are separate from each other. Many customers use Starbucks stores as makeshift office or meeting place because of the free and unlimited WiFi. A firm's value chain is part of a larger system that includes the value chains of upstream suppliers and downstream channels and customers.
A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation. The value chain model is a useful analysis tool for defining a firm's core competencies and the activities in which it can pursue a competitive advantage as follows:. A firm may create a cost advantage either by reducing the cost of individual value chain activities or by reconfiguring the value chain.
Once the value chain is defined, a cost analysis can be performed by assigning costs to the value chain activities. The costs obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activities. A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration means structural changes such a new production process, new distribution channels, or a different sales approach.
For example, FedEx structurally redefined express freight service by acquiring its own planes and implementing a hub and spoke system. A differentiation advantage can arise from any part of the value chain. For example, procurement of inputs that are unique and not widely available to competitors can create differentiation, as can distribution channels that offer high service levels. Differentiation stems from uniqueness.
A differentiation advantage may be achieved either by changing individual value chain activities to increase uniqueness in the final product or by reconfiguring the value chain. Many of these also serve as cost drivers. Differentiation often results in greater costs, resulting in tradeoffs between cost and differentiation. There are several ways in which a firm can reconfigure its value chain in order to create uniqueness. It can forward integrate in order to perform functions that once were performed by its customers.
It can backward integrate in order to have more control over its inputs. It may implement new process technologies or utilize new distribution channels. Ultimately, the firm may need to be creative in order to develop a novel value chain configuration that increases product differentiation. Because technology is employed to some degree in every value creating activity, changes in technology can impact competitive advantage by incrementally changing the activities themselves or by making possible new configurations of the value chain.
Note that many of these technologies are used across the value chain. For example, information systems are seen in every activity. Similar technologies are used in support activities. In addition, technologies related to training, computer-aided design, and software development frequently are employed in support activities.
To the extent that these technologies affect cost drivers or uniqueness, they can lead to a competitive advantage. Value chain activities are not isolated from one another.
Rather, one value chain activity often affects the cost or performance of other ones. Linkages may exist between primary activities and also between primary and support activities. Consider the case in which the design of a product is changed in order to reduce manufacturing costs. Suppose that inadvertantly the new product design results in increased service costs; the cost reduction could be less than anticipated and even worse, there could be a net cost increase.
Sometimes however, the firm may be able to reduce cost in one activity and consequently enjoy a cost reduction in another, such as when a design change simultaneously reduces manufacturing costs and improves reliability so that the service costs also are reduced. Building on this, all you really need to do is take action and make a plan on the changes that are needed within your production process. Very soon you be excelling in all the things that really matter to your customers.
Create a Course Corporate Learning Mobile. Music Sports Games Marketing. Performing a Value Chain Analysis There are typically two types of competitive advantage that are striven for, cost and differentiation. To gain a differentiation advantage: Identify the value creating activities for the customer, and focus on the specific actions that create the most customer value. Evaluate the differentiation strategies to improve value to the customer, such as adding more product features, putting an emphasis on customer service responsiveness, increase the ability to customize and tailor the products, and offer a range of complementary products that enhance your overall product mix Identify the best differentiation method that is sustainable long term, which is often a mix of many different activities to promote delivering a higher customer value.
The right combination will give you a sustainable differentiation advantage. To gain a cost advantage: Determine the primary activity of the company, and all the support activities performed Look at each activity back to even receiving the inventory, marketing, sales, and after sales support and clearly identify each, and make sure they are separate from each other.
This step is difficult, as it requires a strong knowledge of an organizations value chain, and often the value chain activities are not organized in the same way as the company is. Analyze how the work is done surrounding every separate activity, and identify how it adds customer value Rank each activity in terms of relative importance to the total cost of the product Investigate all of the costs of producing the product or the service behind each activity Here you can use activity based costing to calculate specific costs at each process step Address any major sources of cost, or areas where you are lacking i.
You need to understand these before you can work at improving them. Identify if there are any links between the activities, because reducing costs in one may lead to further cost reductions in another.
Identify opportunities where you are able to reduce costs. Once you know these, you can make plans at improving each and every one. Starbucks Primary activities Inbound logistics: This refers to the agents of the company purchasing coffee beans in Africa, communicating the importance of quality standards in the coffee beans and building strategic partnerships with suppliers.
Starbucks is currently in over 50 countries, with both direct stores operated by the company and licensing deals. The normal process is Starbucks selling their products in store without any intermediaries. Recently, there are now retail products available in select supermarket chains.
There is no heavy investment in marketing, but specials and tastings are common, especially when new stores open. One of their main objectives is to provide superior levels of customer service. This is all of the general activities that are required to keep the stores operational, like management, finance, legal support and government relations.
There are a wide range of training programs available for staff, who are considered to be one of Starbucks most important resources. They make use of technology to save costs, and deliver a consistent tasting coffee, anywhere in the world. All the purchasing that is required to produce the end products, like the coffee beans, raw food items as well as the buildings, and machinery.
A value chain is a series of activities or processes that aims at creating and adding value to an article (product) at every step during the production process. Businesses aim at enhancing their margins and thus work to change input into an output which is of a greater value (the difference between the two being the company’s profit margin). May 26, · Value Chain Analysis: Example Case Studies to Get You Started May 26, by Travis Bennett Being competitive in today’s marketplace means doing more than the other hamlergoodchain.ga: Travis Bennett. What Is Value Chain Analysis? Porter’s Concept of Value Chain Analysis. Value chain analysis focuses on analyzing the internal activities of a business in an effort to understand costs, locate the activities that add the most value, and differentiate from the competition.