The Importance of a Business’s Value Chain Serge-Eric Keller Marvin Hagen 06/26/15 The Importance of a Business’s Value Chain Introduction It is the wish of every business to be able to achieve and maintain a competitive advantage. A competitive advantage can be considered to be an advantage, a condition or even a position that will make a firm to be able to operate efficiently and also be able to produce products or services that are of a higher quality than the previous ones or than the other competing firms. When a firm is able to achieve increased earnings as compared to the costs it incurred, then it can be said to have achieved a competitive advantage according to Michael Porter, a …show more content…
Michael Kors Holdings Michael Kors Holdings is an American company that deals with clothing and fashion accessories, including watches and bags. It has many branches around the world. The fashion industry is a very competitive industry especially because fashion products are subject to changes more than any other consumer goods. People always want to stay ahead of the fashion and these industries therefore have to make more efforts in order to be able to win over customers. Fashion products have a very short shelf-life as compared to other products and sometimes it becomes hard for firms to be able to forecast the demand of these products (Christopher et al., 2004). Michael Kors Holdings being an international company with its branches spread in different parts of the world, means that it has a huge global market to serve. Going international has many advantages but at the same it also has its disadvantages. In the global market, the changes happening in the market and the competition are on a very high level. Competition is very high especially when it comes to those fast moving products or services whereby the products or services are of a short cycle and consumer demand change each day. The fashion industry is such in case whereby the products are of a short life. The industry is also characterized by
3. According to the Investopedia, “Competitive advantage is an advantage that a firm has over its competitors, allowing it
2.Competitive Advantage – It includes the best product of an Organization in the competitive market.
Competitive advantage exists when a firm has strategy, product or an attribute that makes the firm capable of delivering similar benefit to that of competitors at a cheaper cost. Having competitive advantage is not enough the company should be capable of sustaining that particular competitive advantage for a longer period of time.
Value Chain analysis evaluates each step business goes through from inception to finality. The goal is to maximize the value for the total cost. Costco's mission is to provide their members with quality goods and services at the lowest possible prices. The company’s mission, values and strategies suggest Costco uses a broad enterprise strategy which fits in the societal framework. To ensure employee motivation, Costco offers them a unique banquet of benefits. This include; paying health benefits for them, 50% higher wage, employee retention of over 90 percent, and maintaining employees even during recession periods (Costco, 2010). The Company’s strength is its primary value chains which split into two distinct functions: Demand fulfilment and Demand generation. Demand fulfilment includes input logistics, operations, and output logistics. Demand generation involves sales, marketing, and service department which breaks down into sub-tiers. Costco’s support activities include HRM, technology development, firm infrastructure and procurement. Costco’s weaknesses are difficult to pinpoint; one weakness is persistent low operating profit margins. Bigger profits can occur by not paying employee benefits and with demanding higher returns from their suppliers. The problem would be at what cost? Costco receives cost advantages from value adding major (brand items) activities. However, it continues to experience a challenge
Competitive advantage – competitive advantage is the ability of one organization to outperform other organizations because it produces desired goods or services more efficiently and effectively than its competitors. The four building blocks of competitive advantage are superior efficiency, speed, flexibility, innovation, and responsiveness to customers.
To survive and thrive, an organization must create a competitive advantage. A competitive advantage is a product or service that an organization’s customers place a greater value on than similar offerings from a competitor. Unfortunately, competitive advantages are typically temporary because competitors often seek ways to duplicate the competitive advantage. In turn, organizations must develop a strategy based on a new competitive advantage.
The basic principle in defining the value chain, according to Michael Porter (Porter, 1985), is that the activities include a variety of disaggregations from the below three perspectives. First, they have different economics, implying that these activities are functioning in different segments of the market. Second, even though the economics differentiation is not that evident, isolated activities should have a potential impact for it. Third, value-adding activities have significant input scale.
The value chain is a temporary competitive advantage for Zara. The major reason why it is not a sustainable advantage is that it is not rare. Barney stated that it is not a sustainable resource if a large number of other firms can also gain benefit from the same resource. It is clearly that Zara’s competition also get their global value chain. Therefore, no firm could get a competitive advantage on the common strategy. Nevertheless the value chain is difficult for new entrants to imitate cause it is costly in capital and time. Further, there is not another way
Michael Kors is sought out to be one of the top luxurious companies to date that combine style, sport, and elegance to suit any shopper. The company produces handbags, clothing, shoes and accessories in all colors, shapes and sizes. Michael Kors, the creator of the brand, based his store in New York City and launched the first of his women’s collection in 1981. Michael Kors products can be found in the high-end department stores such as Bergdorf Goodman and Saks Fifth Avenue. From Kors’ humble roots, he had determination and admiration to produce his own line at a young age. With his simple, elegantly tailored clothing mixed with his intelligent persuasive sales techniques, it was proven that he had found his niche. He worked through a six year downfall and came out victorious by expanding his own brand by launching menswear, accessory and perfume lines from 1997-2003. With the past success in the books, Michael Kors has recently been through yet another downfall in sales. Kors, took into consideration of all the critiques and criticism regarding his brand and ran with it. As a once lagging and played out brand, Kors has managed to up his sales by becoming more versatile with his products and listening to his customers. He has had a huge turn around in sales and has since been worn by top celebrities with a flood of more customers each day. Michael Kors has been focusing on gaining international and online popularity. “Fashion today isn 't just
A Competitive Advantage is a peculiarity for an organization between it's competitors . It's achieved either by lowering prices or by greatening the value of the product or by offering luxury service and benefits to cope with high prices .
Competitive advantage is that a company has better ability in earning profit and profit growth compared to its competitors for the same group of customers in one industry.
Competitive advantage(CA) is an advantage competitors gain by providing or offering customers or consumers greater value for their money through product and service differentiation or through lower prices. Maintaining competitive advantage is crucial to many businesses or organizations' success in order to survive in the market. Competitive advantage is characterized by superior performance which could be an attribute to outperform the competitors whether current or potential; or gaining a higher market share in a particular industry thereby ensuring market leadership; or ultimately, maximization of profit.(JOBBER 2010)
Competitive advantage is explained by Mahoney and Pandian (1992) as the function of industry analysis, organizational governance and the firm’s effects in the form of resource advantages and strategies. In order for a firm to be competitive it must adapt to the volatile business environment and through strategic management decisions establish a competitive advantage that will ultimately produce superior performance relative to its competitors (Akimova 2000).
In order to achieve competitive advantage, a firm must perform one or more value-creating activity that is more superior compared to other competitors. Superior value is created through lower costs or superior benefits to the buyers.
* A competitive advantage is one that distinguishes a firm or a business from the competitors in the minds of the customers. It also refers to the state or condition that make a business more successful than the businesses it is competing with, or a particular thing that makes it more successful such as having a higher sales through offering low or affordable goods and services.