Essay On Value Chain Analysis

The value chain analysis allows the firm to understand the parts of its operation that create value and those that do not. This is important for firms to understand because the firm earns above-average returns only when the value it creates is greater than the costs incurred to create that value. The value chain analysis has two parts which include the value chain activities and support functions. The value chain activities are “activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers” (Hitt, Ireland, & Hoskisson). The support functions are the “activities or tasks the firm completes in order to support the work being done to produce, sell, distribute, and service the products the firm is producing” (Hitt, Ireland, & Hoskisson)

The model above is the value chain, the areas of finance, human resources, and management information systems are all the support functions. The areas of supply-chain management, operations, distribution, marketing (including sales), and follow-up service are the value chain activities.
In this next section, the value chain analysis will be applied to each company based on the business-level strategy. Since both Kohl’s and JC Penney’s use focused cost leadership strategy, it is important that the support functions are aligned with this strategy in order to create value. The finance function needs to “manage financial resources to ensure positive cash flow and low debt costs” (Hitt, Ireland, & Hoskisson). Even though a company may be profitable does not necessarily mean that it is generating cash and vice versa (Investopedia Staff). Kohl’s positive cash flow indicates that they are generatin...

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...iling industry there are several competitors fighting for revenue and market share. To gain customer loyalty, firms offer special discounts on purchases, memberships or other special services. (Investopedia Staff). To gain customer loyalty, Kohl’s and JC Penney’s offer credit cards that are tied to additional savings when used. In addition, Kohl’s has Kohl’s cash that a customer earns with a purchase. The customer can then use the Kohl’s cash towards their next purchase. Also, when you make a purchase at JC Penney’s a coupon for additional savings is printed at the bottom of your receipt that can be used towards the customer’s next purchase. Again, the focused cost leadership is aligned with the high intensity of rivalry among competitors. By competing as a cost leader it forces rivals to compete on other things rather than price alone (Hitt, Ireland, & Hoskisson).