Value Chain

In order for a firm to create competitive advantage, it needs to create a set of activites that can deliver value to the specific product and services it offers to its customers. To start talking about my life as a “value chain”, I may need to compare it to a specific product”. This is going to take precedence both in my personal life and professional life.

A company gaining a competitive advantage, through their Value chain, supermarket like Aldi has to differentiate itself through performing their value chain activities better than the competitors. Aldi to add value to their customer, the value obtained by these activities should exceed the cost of running their operations.

Effective value chain as a competitive advantage can contribute significantly to the prosperity of a firm in the competitive arena, but it can cause dire situations if not operated properly (Guy, 2011). However, there are conflicts among companies as to how stakeholders think they gain competitive advantage. Porter (1996) suggests: A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at lower cost or do both.

The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.

According to Bucklin (1966) it’s important to understand customer preferences when designing the value chain. This because the value chain will only be viable over time if customers feel that it provides a form of value. This value is created if the actors of the chain provide activities that result in cost- efficiency and/ or better service. There are five service performance areas where actors can create this value: unit size, availability, waiting time, variation in production and information (REF).

In differentiation strategies, the emphasis is on creating value through sustainable uniqueness. This can be achieved through product innovations, superior quality, or superior service, which is then sustained and leveraged through creative advertising; brand-building and strong supply chain relationships. Another requirement for a successful differentiation strategy is that customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create it. A differentiation strategy will lead to higher firm performance only if buyers value the attributes that make a product or service unique enough to pay a higher price for it or if they choose to buy from that firm preferentially. If

A differentiation strategy seeks to provide products or services that offer benefit that are different from those of competitors and that are widely valued by buyers. (Johnson, Scholes&Whittington, 2008). The aim of using differentiation strategy is to achieve competitive advantage. This could be achieved for example like the clothing brand ZARA, by offering better products at the same price. A differentiation strategy must be based on two key factors: the strategic customers, the company has to identify their needs and values, company also must identify who are its main competitors.

Successful organizations remain profitable and competitive when achieving customer delight is their overall objective. Designing and implementing an effective value chain is the key to success. When competitive advantage is tied to customer delight then an organization will see growth and profitability. In this paper the interwoven relationship between effective value chain management, profitability, competitive advantage and customer delight will be outlined. All firms make decisions that affect their competitive position and profitability. Strategic planning is the organizational process of making these important decisions. It is undertaken in an

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.

According to Michael Poter (cited in David 2011) the value chain can be best described as “the business of a firm, in which total revenues minus total costs of all activities undertaken to develop and market a product or service”. A strategic cost analysis “is the process whereby a firm determines the costs associated with organizational activities from purchasing raw material to manufacturing products to marketing those products” (David 2011, 119). The goal of this analysis is to determine whether or not a company has a competitive advantage over its competitors. This is done by identifying where, low-cost advantages or disadvantages that exist anywhere along the value chain from raw material to customer service activities. Also the strategic cost analysis also enables the company to better identify its own strengths and weaknesses.

According to the wiki dictionary, “a value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market” (Michael E, 1985). Having a value chain is very important for companies nowadays because value chain analysis can assist companies in becoming more competitive in the intense market. Globalization decreases the time and cost between companies in different countries. It also provides convenience for companies and customers. If Chinese customers took an order on Amazon.com, they might receive the goods in less than a week including completing the economical transition. Briefly speaking, the value chain analysis is a strategy that analyzes the inner

Manufacturing, the process responsible for producing any goods manipulated from their raw form, whether transforming steel into an automotive vehicle or grains into cereal, this fundamental component of the value chain plays a central role in the world economy. Born during the industrial revolution, many of the processes remain the same, with executives running the factory, supervisors overseeing operations, shop floor workers creating the product, and maintenance workers ensuring the smooth running of equipment. While these processes have transcended time relatively unchanged, the technology and tools employed by workers to complete these processes has changed, albeit slowly in some cases. Driven by executive pressure to reduce costs and improve margins, factories through the ages have engaged in strategic moves to diminish the expenses of labor. Moving to areas with less stringent regulations and lower labor costs or investing in technologies that automate human tasks, competitive pressures has made the manufacturing sector one of the most technologically evolved.

The value chain concept was created by Michael Porter and explained in his book “Competitive Advantage”, published in 1980. The value chain is a series of activities that create and build value- culminating in the contribution of total value to the organization. Porter used the concept of value chain as a systematic approach to examining the development of an organization’s competitive advantage in the marketplace.

Product differentiation is the process of designing the products to satisfy the customer needs. If managers take the strategies to differentiate the products in terms of innovation, quality on excellence, customer

Value chain is defined as the set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service to the market. Michael Porter first described this concept in the 1980’s, and many businesses focus on their specific activities based on this idea. Due to the nature of our business and the industry we are in, it is clear that our restaurant’s value chain consists of small business, consumer-based activities. The primary activities in our value chain are the purchases of raw foods, inventory control and restaurant operations, logistics, customer service, marketing, and sales. The support activities are our accounting, finance, and systems support departments, as well as the legal, environmental, and safety requirements me must adhere to. The process of hiring, firing, and training is important in our human resource department also.