Using Value-Chain Analysis to Discover Customers' Strategic Needs

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Using value-chain analysis to discover customers’ strategic needs
David W. Crain and Stan Abraham

David Crain, a marketing and strategy consultant, is visiting professor of marketing at Whittier College, CA, and former Director of Marketing at Fluor Corporation ( Stan Abraham is professor of strategy and entrepreneurship at Cal Poly Pomona (scabraham@ and author of Strategic Planning: A Practical Guide for Competitive Success (Thomson South-Western, 2006).

ere is a five-step method for discovering a customer’s particular strategic needs based on a unique application of value-chain analysis.[1] Performing this analysis on important customers helps identify high-value new business opportunities. It
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36 NO. 4 2008



Exhibit 2 Porter’s original value chain extended in upstream and downstream directions (bold font)

how its business processes add value and whether any have unique best-practice features. To perform the external value-chain analysis, team members should ask the customer a set of getting-to-know-you questions. What does your supply chain (the upstream value chain) look like? What role does your company play in it? How do your products reach their customers (the downstream value chain)? Your final diagram models only this single customer’s value chain and it represents virtually everything the customer does to add significant value. If your relationship with the customer permits a candid exchange of information, have the customer validate the value chain you have created. As an example of how the diagnostic process works, consider how a supplier to Wal-Mart might learn to enhance its value.[6] The objective of creating both internal and external value chains is to understand Wal-Mart well enough to be able to discern its implicit and explicit strategic concerns. Exhibits 3 and 4 depict preliminary pictures of Wal-Mart’s internal and external value chains. Getting to this initial stage is relatively easy – adding more detail, nuance, and understanding takes more time, involves interviewing Wal-Mart executives, and more closely observing how the firm

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