What is the company's competitive advantage? A value proposition helps businesses identify what makes it different from competitors. But how can you tell if your business is creating the most value for your customers and delivering great profit margins? Let's find out about the value chain with Giaiphapdonggoi.net!
Table of Contents [Hide]
1. What is a value chain?
Value chain refers to the functional activities of a business that add value to customers. The concept was created around 1985 by Michael Porter, a professor at Harvard Business School. According to Porter, it includes core activities and supporting activities, all of which add value to the products or services the business provides. Ideally, the company's products go through the activities of the value chain, and along the way each activity adds value to the product.
What is a value chain?
Is a powerful tool for segmenting a company into strategically relevant activities that focus on sources of competitive advantage, i.e. specific activities that lead to higher prices or lower costs. .
A company's value chain is often part of a larger value system that includes firms upstream (suppliers) or downstream (distribution channels), or both. This view of how value is created forces managers to look and see each activity as not just an expense but a step that must add some added value to the finished product or service. .
2. Why is the value chain important to businesses?
The value chain increases the efficiency of the business so that the customer can get the product with the most added value at the lowest possible cost. The ultimate goal of value chain management (VCM) is to create a competitive advantage for the company by increasing the overall profit margin.
Why is the value chain important to the business?
However, value chain management offers various benefits. These include improved material and product flow, reduced waste in the supply chain process, seamless information flow, and enhanced overall customer experience.
3. What is value chain analysis?
Value chain analysis is a way for businesses to analyze the activities they take to create a product. Once activities are analyzed, a business can use the results to evaluate ways to enhance its competitive advantage.
While one of the goals of value chain analysis is to improve operational efficiency, its ultimate and most important goal is to establish an advantage over competitors.
What is value chain analysis?
When you complete your value chain analysis, you will have identified the advantage you are trying to gain over your competition. Firms choose between two types of competitive advantage: cost advantage and differential advantage.
Competitive advantage
Competitive advantage is what sets your business apart from your competitors. To develop an edge, you need to have a clear idea of your target market. If you're an entrepreneur interested in clearly defining your business's audience and target market, be sure to find the ideal niche to launch or sell your product in.
You will also need to know the benefits your product offers to your target market and have a solid understanding of your competitors and their offerings.
When creating a value chain analysis, a business seeks to gain a competitive advantage in one of two areas.
Cost advantage
The goal of a cost advantage strategy is to be the lowest cost supplier in your industry or market. Companies that excel with low-cost strategies have high operational efficiency and use low-cost materials and resources to reduce the overall price of their products or services. Examples include McDonald's and Walmart.
Differentiation advantage
Using a differentiation strategy, you offer a unique or highly specialized product or service to gain a competitive advantage. Businesses need to devote time and resources to innovation, research and development. A successful differentiation strategy allows a business to charge a higher price for its product or service. For example Starbucks and Apple.
Ideally, you should choose a single competitive advantage to focus your efforts on. Depending on the competitive strategy you choose, the goal of your value chain analysis will be to reduce costs or differentiate to improve profit margins. You will then have a clear idea of your business goals and how you intend to deliver value. It also narrows down the range of changes that may be needed
implemented to improve efficiency.
But which competitive advantage would you choose to use? Using Porter's value chain model, you can review your business practices, identify a unique value proposition, and decide your best bet for establishing dominance over the competition. your competitor.
>> See more packaged products at Giaiphapdonggoi.net
4. Porter . value chain analysis
Michael Porter, a professor at Harvard Business School, introduced a simple value chain model in his book, "Competitive Advantage". He developed the steps to perform value chain analysis and divided business activities into two categories: primary and supporting.
Identifying key and supporting activities is an important step in creating a value chain analysis. You'll know where you're using the most resources, where your business can improve, and where your competitors might have an edge over you.
Porter . value chain analysis
Main activities and support
In Porter's value chain model, primary and supporting activities are the key processes and systems that a business uses to develop its products or services. The five main activities are inbound logistics, operations, outbound logistics and sales. Supporting activities are solid infrastructure, human resource management, technology development and procurement.
Main activities
There are five main activities and they include all the actions that go into creating a product of the business.
Inbound Logistics: This is the way in which materials and resources are obtained from suppliers before a final product or service can be developed. In your analysis, consider the location of your suppliers and the cost of transportation from their facility to yours.
Activity: Activity is how materials and resources are produced, leading to the final product or service. Here, you can review your warehouse, machine, and assembly line operating costs.
Outbound Logistics: After the product or service is completed, it needs to be delivered. Outbound logistics describes this delivery process. Take into account your shipping costs to consumers, warehousing fees, your distributor relationship (e.g. do they charge per sale?), and order processing activities. row.
Marketing and Sales: This is how your product or service is presented and sold to your ideal target market. In your analysis, factor in advertising costs, promotional costs, reach, and cost-per-conversion.
Service: This is the support a business provides to its customers, which may include product training and support, warranties and guarantees. You will consider repair costs, product training costs, product adjustment frequency, and more.
Support activities
Supporting activities help key activities in creating an advantage over competitors. These include:
Solid infrastructure: This requires all the regulatory, financial and legal systems a business has in place to make business decisions and effectively manage resources.
Human Resource Management: Human resource management includes all the processes and systems involved in the management of employees and the recruitment of new employees. This is especially important for companies that offer door-to-door service, and excellent employees can be a competitive advantage.
Technology development: Developing technology that helps businesses innovate. And technology can be used in different steps of the value chain to gain an advantage over competitors by increasing efficiency or reducing production costs.
Procurement: This is how resources and materials for a product are retrieved and suppliers found. The aim is to source quality and pocket-friendly suppliers.
5. Steps of value chain analysis
Value chain analysis requires research and can take time to develop. Below are the general steps to follow to create a value chain analysis.
Steps of value chain analysis
Step 1: Identify the main and supporting activities of the business.
Together, the main and supporting activities make up the value chain. They cover each action required in the development of a product or service, from raw materials to the final product.
Step 2: Analyze the value and cost of the activities.
The team tasked with creating value chain analysis should think about how each activity provides value to the customer and the business as a whole. Compare the performance to the competitive advantage you're trying to achieve (cost leadership or differentiation) and see if it supports the goal.
Once the value analysis is complete, consider the costs of the activities. Is the activity labor-intensive? What is the price of material X? Asking similar questions will help determine which activities are cost-effective and
no action. This is where areas for improvement can be identified.
Step 3: Identify opportunities to gain competitive advantage.
Once the value chain analysis is complete, key stakeholders within the business can see an overview of where the business is excelling and where operational improvements can be made.
Start with improvements that take small changes and deliver high-impact results. Once easy wins are identified and realized, you and your team can tackle the bigger challenges that might hinder effectiveness.
Value chain analysis gives businesses a clear idea of how to tailor their actions and processes to deliver the most value to the target market and increase profit margins for the company.
Thus, Giaiphapdonggoi.net has just shared with you some information about the value chain. Analyzing your value chain will help you identify areas for improvement and activities that provide the most value to your customers and your business as a whole. Eliminating inefficient business practices accelerates production, improves competitive advantage, and increases profit margins.
Check out more articles on the same topic:
- Packing and shipping frozen goods
- What is Junior? Job of a Junior
Please see more packaged products at PACKING SOLUTION!!!
- PP belt
- Pet belts
- Battery-powered hand strapping machine
