Value chain analysis
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Value chain analysis was first suggested by Michael Porter in 1995 as a way to present how value is constructed for the end customer. It can be used to increase competitiveness, reduce costs, and improve market share, ultimately improving overall profitability. Value chain analysis involves examining a firm's internal costs and processes that differentiate its products or services from competitors, as well as vertical linkages along the entire supply chain from suppliers to end customers. Firms can use value chain analysis along with frameworks like industry structure analysis, core competencies analysis, and segmentation analysis to develop strategies to enhance competitiveness.
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Value chain analysis
- 1. Value Chain Analysis What can it do for you and your company? Copyright l aney & associates Inc. November 2002
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- 22. Business Pyramid Business Intelligence Competitor Analysis Competitive Intelligence Individual Competitor Profile Assimilates all Competitive Intelligence Broad – environmental scanning, market research and analysis
- 40. Value Chain Components Value Chain Analysis for Assessing Competitive Advantage – CMA Handbook R&D Design Production Marketing Distribution Service Supplier Value Chain Firm Z Value Chain Distribution Value Chain Buyer Value Chain Disposal Value Chain End-Use Consumer Pays for Profit Margins Throughout the Value Chain Primary Activities Support Activities Service Service Service Service
Editor's Notes
- What does this mean?
- Market share Average market share for CI companies was 5.4% compared to 0.8% for other companies Earnings per share CI Companies had an average EPS of $1.24 per share compared other companies in the same industry that posted a net loss for this measure of $0.07. CI companies performed better than other companies on this measure in 15 of 19 industries
- Strategic Analysis Industry Classification Core Competencies and capabilities Resource Analysis Future Analysis
- Product-oriented Analysis Reverse Engineering Teardown Analysis
- Behavioural Analysis Competitor’s management “ Shadowing”
- Financial Analysis Traditional Ratio Analysis Sustainable Growth Analysis Disaggregated Financial Analysis Competitive Cost analysis
- Customer Oriented Analysis Competitive Benchmarking Customer Value Analysis Value Chain Analysis
- Customer Oriented Analysis Competitive Benchmarking Customer Value Analysis Value Chain Analysis
- Identify factors that determine costs of different activities Understand why a firm’s costs or a sector’s costs differs from its competitors Understand why large differences in profitability exist within the same industry Identify which activities are performed efficiently or inefficiently Show how costs in one activity influence another Identify competitor’s cost positions Understand the nature and source of competitive advantage
- It needs to Identify the processes to create the product Determine the portion of the total cost of the product to each process Identify the cost drivers for each process Identify the links between the processes Evaluate opportunities for achieving relative cost advantage
- This could involve Superior product features Improved marketing channels Enhanced support/service Brand or image positioning Price
- Expertise in internal operations and information External financial and non financial information Integration of databases and potential sources of timely information Cooperation of all managers involved in value chain processes
- Knowledge of publicly available data sources and how to mine them Ethical inquiry of suppliers, buyers… Knowing what’s inside your own peoples’ heads
- For example: Opportunities can be identified for suppliers outside of the firm’s immediate sphere of influence Forging alliances with an end market retailer gives your supplier potential access to other markets for him. This helps to increase his overall profitability/reduce costs thus improving your position with him - a “Win-Win” situation