Value chain is a well-known concept in management. Everyone who has a little interest in management, probably have heard about it.
In this presentation I've had a deep look into this topic and its correlation to strategy.
4. Value Creation Course
Value Chain Management10
“The essence of strategy is
choosing what not to do.”
“The company without a strategy
is willing to try anything.”
Michael Eugene Porter (born May 23, 1947) is the Bishop William Lawrence
University Professor at The Institute for Strategy and Competitiveness,
based at the Harvard Business School. He is a leading authority on
competitive strategy and the competitiveness and economic development
of nations, states, and regions. Michael Porter's work is recognized in many
governments, corporations and academic circles globally. He chairs Harvard
Business School's program dedicated for newly appointed CEOs of very
large corporations.
Michael E. Porter
Bishop William Lawrence University Professor
5. Value Creation Course
Value Chain Management26
Levels of Strategy
Corporate StrategyCorporate Strategy
The strategic perspective
(range, scope, diversity) of
the organization
Competitive StrategyCompetitive Strategy
The search of a distinctive
competitiveadvantageforeach
business/product/service
Functional StrategyFunctional Strategy
The source of competitive
advantage in the activities
and functions carried out
by the business
6. Value Creation Course
Value Chain Management06
Key Success
KSFs are Stakeholder Requirements.
Needs to thrive and bean effective competitor.
Factors(KSF)
7. Value Creation Course
Value Chain Management05
Ability
The ability to meet
recognized key
success factors for the
relevant industry or
market,
Competency
Distinctive
competencies and
capabilities which
yield some form of
competitive
advantages,
Customerizing
Ability and
willingness to deploy
competencies and
capabilities to satisfy
the special
requirements of
individual customers.
Customerizing
Instead of Marketing
Suggested by Hall(1992)
to reflect the importance of
customers as individuals
rather than as a group.
Tosatisfystakeholdersand
outperformrivals,
Competitive
Offering
mustcompromise:
8. Value Creation Course
Value Chain Management
Criteria of Effectiveness
The Competitive Offering
Value Creation Course
Value Chain Management
9. Value Creation Course
Value Chain Management12
Market
Provide access to
important market areas
or segments
Customer Benefits
Make a significant
contribution to
perceived costumer
benefits of the product
or serice
Be Difficult
Prove difficult for
competitors to imitate
Competencies
Core
‘Should be developed to
meet key success
factors’
(Prahalad and Hamel 1990)
10. Value Creation Course
Value Chain Management12
Technologies
Processes
(or capabilities)
Strategic
Architecture
Competencies
Core
Three Strands to core
competencies
(Prahalad and Hamel 1990)
Examples of Exxon for its
financial expertise or BP for its
exploration skills
11. Value Creation Course
Value Chain Management12
Strategic
Architecture
Competencies
Core
Strategic Architecture
Competencies
(Kay - 1993)
Examples of Nike’s focus on product design,
marketing and personality endorsements.
Strategic Success Requires;
1. Internally: coordinated, synergy-creating
manner, integrating functions and
businesses
2. Externally: Value-Adding Network managed
as an effective, integrated system.
Suppliers Firm Distributors Consumers
So Important Themes in Architectures are;
1. Internally: Systemic Thinking
2. Externally: Well established Value Chain.
12. Value Creation Course
Value Chain Management08
Accountancy Measures
1
Performance Measurements
2
New Paradigm; The key is
“VALUE for CUSTOMER”3
VALUE
Adding
13. Value Creation Course
Value Chain Management09
“ Business Strategy is all about
competitive advantage”
“Without competitors there
would be no need for strategy”
Identify the KSF in an industry and concentrate
resources in a particular area where the company
sees an opportunity to gain most significant
strategic advantage over its competitors.
Identify
1
Exploit any area where he company enjoys
relative superiority.
Exploit
Aggressively attempt to change the KSF by challenging
the accepted assumptions concerning the ways in which
business is conducted.
Change
Open-up new market or develop new products.
Innovate
How to define a
good strategy
Ohmae(1982)
15. Value Creation Course
Value Chain Management18
Porter
Model of
Generic
Strategies
Cost Leadership Differentiation
Cost Focus Differentiation Focus
COMPETITIVE ADVANTAGE
COMPETITIVESCOPE
16. Value Creation Course
Value Chain Management18
Porter
Model of
Generic
Strategies
Cost Leadership
TOYOTA
Differentiation
GENERAL MOTORS
Cost Focus
HYUNDAI
Differentiation Focus
BMW, MERCEDES,
MAZDA
COMPETITIVE ADVANTAGE
COMPETITIVESCOPE
17. Value Creation Course
Value Chain Management07
Value Chain
Analysis
A Systematic way of
studying the direct and
support activities
undertaken by a firm
If done correctly, should arise
awareness concerning of costs
and the potential for lower costs
and for differentiation.