Starbucks 's Value Chain Analysis Essay

“Value Chain Analysis” is a tool for analyzing the value creation system of competitors. Objective is to develop a value creating system with competitive advantage. A value chain is a chain of activities. Products pass all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain, with the costs occurring throughout the activities. A diamond cutter can be used as

The value chain can be used to diagnose and create competitive advantages on both cost and differentiation. I’ve written about this in Using the Value Chain to Create Competitive Advantage.

Value Chain Analysis is a tool that used to identify the company’s primary and support activities that can creates value for the product to the customers, to analyze the activities to be cost leadership or differentiation strategy and eventually to develop a competitive advantage and create shareholders value. By simply explaining of creating value, a company takes raw inputs (timber) and to add “value” (designing and manufacturing) to them by converting them into something of worth to people for paying money for it (furniture).

According to Peppard and Rylander (2006), the concept of a value chain has been a dominant position in the strategic analysis of industries. Kaplinsky and Morris (2001) state that the value chain describes whole process of activities: conception of product or service, diverse phases of production, delivery to final consumers, and customer service. After the initial proposal of

Value chain was first crafted by Michael Porter in his book “Competitive Advantage Creating and Sustaining Superior Performance” (1985), to illustrate how customer value accumulates along a chain of activities that lead to an end product or service.

Many theories have been proposed to explain and indicate how value can be added through a business’s activities and operations. This section will represent the literature review and theoretical background of the value chain analysis approach. For this approach a brief overview and summary will be discussed in the paragraphs to follow. Although available literature covers a wide variety of such theories, this review will focus on Porter’s Value Chain. The theme of Porter’s value chain will emerge repeatedly throughout the literature reviewed. The abovementioned topic is represented in a variety of literature contexts, this paper will primarily focus on the value that can be added through using Porter’s Value chain for analysing this.

The idea of the value chain has been proposed by Michael Porter in his book "Competitive Advantage" to identify the sources of competitive advantage through analysis of certain types of activity of the company. In foreign economic literature makes a clear distinction between the chains, initiated by producers and buyers. Value chain "divides the company 's operations in the strategically important activities to examine the costs and existing and possible means of differentiation." The competitive

Now, it’s time to give some examples of companies who utilized value chain analysis for their advantage. Now remember that value chain is producing a competitive advantage to your products. Some companies do this by lowering the overall costs of the product, so that consumers will be tempted to buy due to the low price. Other companies do this by adding cost or value to their products, this will pursue people that the brand uses quality supplies and a high standard labor force.

Value chain analysis is of vital importance for each and every firm in the business world. It deals with adding value to each and every step in the working of the firm, that is it adds value right from the raw materials being used to the end products or the services of the firm. The value chain analysis describes the activities the organisation performs and links them to the organisation’s competitive position. The idea of value chain was built upon the insight that a company is a random compilation of machinery, equipment, people and money. Hence, value chain came into existence which can arrange things into systems and systematic activities for which customers will feel it worthwhile to buy a product or even access the services of a particular firm.

Value chain analysis is also 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. In other words, by looking into internal activities, the analysis reveals where a firm’s competitive advantages or disadvantages are. The firm that competes through differentiation advantage will try to perform its activities better than competitors would do. If it competes through cost advantage, it will try to perform internal activities at lower costs than competitors would do. When a company is capable of producing goods at lower costs than the market price or to provide superior products, it earns profits.

A value chain may be defined as the chain of activities that firms operating in specific industries, such as the healthcare industry, perform in order for them to deliver valuable service or product for its consumers. The value chain concept comes from management of business and it was first described by Michael Porter in the year 1985 in his book “competitive advantage.” The main idea of value chain may be based on a process view of an organization, the idea to see an organization as a system that is made up of different subsystems that have inputs, different transformation processes, and outputs. Some of the factors within the chain include money, materials labor, equipment land, administration, management, and building. How the value chain is managed, including the above factors, determined the effects on profits and costs. The supply chain may be used for the success of any organization through the subdivision of an organization’s functionality. The division ensures that there is easier management of human assets and resources. An example of a health care value chain is the flow from inbound logistics to operations to outbound logistic to marketing and sale and finally to provision of services and consumption of products.

A value chain is a set of activities that organizations carry out to create value for their customers. Porter proposed a general-purpose value chain that companies can use to examine all of

Another point of view is to take a look at the value chain analysis which helps to identify the most valuable activities of a firm. Wheelen, Hunger, Hoffman, & Bamford (2014). In the case of Electrolux, it would appear that they provide considerable value to the appliance market however; the struggle (as previously mentioned) has been breaking into emerging markets in this case, China. With considerable middle class growth in China, the standard of living is rising exponentially; therefore, a large number of new households will be able to invest in appliances and other household products. The second point in the value chain analysis begs the question of rarity or more succinctly, can resources be acquired by one or limited organizations. Resources which are rare and valuable can provide a temporary competitive advantage. Conversely, when more than a few companies posses the same resource or utilize the same capability, this can lead to competitive parity. Wheelen et al (2014) Therefore, one must ask several questions in order to find rare resources. For example; how many companies own a resource or can perform capability in the same way as Electrolux? And, can a resource be easily bought in the market by rival companies? In the case of Electrolux the rareness component is nonexistent because other companies e.g., LG Electronics, Whirlpool and Haier already have a stronghold in the global market with similar products. Furthermore, China has been known to

First suggested by Michael Porter, the value chain is defined as internal processes or activities a firm performs “to design, produce, market, deliver and support its product” (IMA, 1996, p.1). How the firm’s value chain performs its activities is a reflection of “its history, its strategy, its approach to implementing its strategy, and the underlying economies of the activities themselves” (p.1). Achieving a competitive advantage starts with a clear view of the current performance of the value chain. Porter’s value chain approach aid firms in identifying the areas in which they can derive the most benefit from analytics and operations research. By dividing the firm’s activities into two main categories (primary and support activities), a firm can analyze the interdependent activities as well as the linkages that connect these activities. According to Porter, “careful management of linkages is often a powerful source of competitive advantage because of the difficulty rivals have in perceiving them…” (Poppelaars, 2013). The net result of the value chain is the creation of margin potential which translates into a competitive advantage.

As a part of environmental awareness coffee companies will have to be aware about the way their coffee beans are produced and the way to manufacture and sell their products. Design their supply chain