VALUE CHAIN MODEL PROS AND CONS PRESENTED BY, NAGESWARI.A
WHAT IS VALUECHAIN MODEL?VALUE CHAIN is the sequential set of primary and support activities that an enterprise performs to turn inputs into value-added outputs for its external customers.As developed by Michael E. Porter, it is a connected series of organizations, resources, and knowledge involved in the creation and delivery of value to customers.
DEFINITIONJohn Del Vecchio, a value chain is “a string of companies working together to satisfy market demands”.The value chain typically consists of one or a few primary value (product or service) suppliers and many other suppliers that add on to the value that is ultimately presented to the buying public.
ADVANTAGESA big advantage is that the value chain is a very flexible strategy tool for looking at your business, your competitors and the respective places in the industry’s value system.The value chain can be used to diagnose and create competitive advantages on both cost and differentiation.It helps you to understand the organisation issues involved with the promise of making customer value commitments and promises because it focuses attention on the activities needed to deliver the value proposition.
Comparing your business model with your competitors using the value chain can give you a much deeper understanding of your strengths and weaknesses to be included in your SWOT analysis.It can be adapted for any type of business – manufacturing, retail or service, big or small.
DISADVANTAGESIt’s very strengths of flexibility mean that it has to be adapted to a particular business situation and that can be a disadvantage since, to get the best from the value chain, it’s not “plug and play”.The format of the value chain laid out in Porter’s book Competitive Advantage, is heavily oriented to a manufacturing business and the language can be off-putting for other types of business.
Value chain can take a lot of work to finish a full value chain analysis for your company and for your main competitors so that you can identify and understand the key differences and strategy drivers.Many people are familiar with the value chain but few are experts in its use.
The value chain idea has been adopted by supply chain and operations experts and therefore its strategic impact for understanding, analysing and creating competitive advantage has been reduced.Business information systems are often not structured in a way to make it easy to get information for value chain analysis