Value Chain Analysis By Jim Riley

According to the theory of Jim Riley, Value chain analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business couold be grouped under two headings: Primary and Support activities.

Value chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost. It is a systematic approach to examining the development of competitive advantage. The most basic breakdown of primary functions includes inbound logistics, operations, outbound logistics, sales and marketing and service. People should use the other models and frameworks within this software to further differentiate between, and add to, these domains. Product Innovation is one area that is not normally included in the de jure model but is often included in the de facto model. Value Chain Analysis describes the activities that take place in

Companies are using value chain approach to better understand which key areas will give them the greatest edge over its competitors. They are focusing on each division, distribution centers, pricing, product innovation, selling techniques, and value-chain formations.

The value chain is a concept developed by recognized Harvard business management expert Michael Porter in his book "Competitive Advantage (1985)." It breaks up the various elements of producing and

Michael Porter published the Value Chain Analysis in 1985 as a response to criticism that his Five Forces framework lacked an implementation methodology that bridged the gap between internal capabilities and opportunities in the competitive landscape. This framework focused on industry attractiveness as a determinant of the profit potential of all companies within that particular industry. However, significant differences in performance exist between companies operating within the same industry that can be explained either by the company 's participation in a successful strategic group or by a firm 's specific competitive advantages.

In order to analyse the various types of activities which would help in the creation of competitive advantage he use of Porter’s Value Chain Analysis are done. The value chain analysis will help in order to perform two main activities such as primary & support activities. The primary activities in the value chain analysis takes into consideration inbound and outbound logistics, marketing and sales & after sales service. Whereas the support activities takes into consideration, procurement of raw materials, use of up to date technology, infrastructure of the firm & managing the resources. Both the activities in the value chain analysis are interlinked to one another. It shall be taken into consideration that, technology has been referred to

Value Chain Analysis is a way of identifying which activities are best undertaken by a business and which are best provided by others. Linking Value Chain Analysis to Competitive Advantage it points out what activities of the business directly linked to achieving competitive advantage amongst various competitors.

Michael Porter in his book “Competitive Advantage: Creating and Sustaining superior Performance” published in 1985 introduce the Value Chain Analysis. His theory explained how an organisation can use or maximise its competitive position or strength by linking the activities it performs. This theory assumes that the organisation is more than a random compilation of machinery, people and money. It also proposes that if these things are arranged into systems and systematic activates, the organisation will be able to produce a product or provide a service that customers are willing to pay a price.

Value chain analysis is an influential instrument for executives to recognise the crucial actions within the company which create the value chain for that association, and have the potential of a maintainable competitive advantage for a business.

Value chain analysis, which constitutes the basis of strategic cost management, includes the value creation chain for a corporation, composed of all activities that create value, from the supply of raw materials to the supply of the product to the final consumer. (Yüzbaşıoğlu 2006, 402) In other words, value chain analysis is defined as a strategic tool used to comprehend the competitive advantage of an enterprise, to determine which stage of the value chain may be improved or in which stage the costs may be reduced, and to better apprehend the relationship of the corporation with the suppliers, customers and other enterprises in the sector. . (Blocher et al. 2005, 40).

Harvard Business School invented the concept and believed that competitive advantage cannot be understood by looking at a firm as a whole. The disadvantages of a value chain could include a company becoming too segmented and result in a construed conception of the company’s most important values. Thus, the importance of a successful value chain lies within the linkage of the different processes it incorporates. All in all, the value chain can provide organizations a strategic framework for managing the hundreds of activities that go into making the final product.

The value chain analysis can be basically defined as the various activities which happens in and around the organisation. They also relates them to the analysis of the competitive strength

As outlined in my earlier research, Porter's work on value chain stems from his efforts to take his lessons of Competitive Strategy (Porter, 1980) forward, and provides a prescription for Competitive Advantage (Porter, 1985). There are two generic strategies—cost advantage and differentiation with the focus on broad or narrow market, differing the mix—and value chain is seen as the model that throws up the opportunities for implementing such strategies. With every pointer towards value chain and the definition of the same not clearly stated by Porter (Porter, 1985), it becomes imperative not only to understand the value chain but also to see how it provides the

A low-cost strategy in order to gain market share does possess inherent risk, for example, other competing firms with larger capital may be able to lower their costs, forcing the firm to operate at a reduced profit of even loss. As a result of technology advances, rival firms could be able to surpass their present production abilities, thus eliminating the competitive advantage. In addition, several rival firms could combine their efforts, following a focus strategy and target various narrow markets could be able to achieve an even lower cost within their segments and as a collective group, certainly gain considerable market advantage. Consequently, low-cost leadership, when combined with low prices can bring about a disadvantage which is less customer loyalty (Vokurka & Davis, 2004). Relatively low prices can also result in creating a lasting negative attitude towards the quality of the product in the mindset of the customers.

If you are searching for a way to gain an edge on your competition, consider one of the business world 's most valuable tools: the value chain analysis.