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Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by correctly pricing products and assessing the true costs of materials and labor, organizations can align the improvements in efficiency, quality, and profits with its strategic objectives. Before explaining the advantages that a value chain can offer, it is important to first identify the value chain itself. According to Stabell and Fjeldstad (1998) Porter's work on VCA began by disseminating an organization's activities into two categories, primary activities and support activities (See Figure 1): Primary activities are directly involved in creating and bringing value to the customer, whereas support activities enable and improve the performance of the primary activities The support lable underlines that support activities only affect the value delivered to customers to the extent that they affect the performance of primary activities (p 417). Within the value chain, it is important for an organization to correctly identify how each primary activities category relates to its organization. The first c... ... middle of paper ... ...can be key in improving customer sales. If a customer does not see the value of an organization's product, that customer may begin to shop for a competitor's product based only on price. Price is not the only competitive advantage an organization may have, but if it is not able to articulate the non-price value, it can significantly lower the organization's competitive advantage. References Booth, R. (January 1997). Appreciating the Value Before Counting the Cost. Management Accounting: Magazine for Chartered Management Accountants. 57(1). Retrieved 11/10/2006 from EBSCOhost database. Stabell, C.B. and O.D. Fjeldstad. (1998). Strategic Management Journal. 19, 413-437. Retrieved November 11, 2006 from EBSCOhost database. The Value Chain (2006). NetMBA: Business Knowledge Center. Retrieved November 11, 2006 from: http://www.netmba.com/strategy/value-chain/
The series of activities that are enacted by a firm that add value to a product beyond the cost of the production are referred to as the value chain. Harley Davidson offers a combination of superior performance and unique attributes within its value chain that promotes their core competencies and provides them with a competitive advantage.
Dess, G. G., Lumpkin, G. T., Eisner, A. B., & McNamara, G. (2012). Strategic Management: Text & Cases (6th Ed.). New York, NY: McGraw-Hill.
Lynch (2006) explained this as it is an association in between main values that adds tasks plus supporting tasks. In Audrestsch (1995) it is proposed that this is considered like a tactical valuation means which helps in diagnosis addition of values by the process of weaknesses plus strength. Below given image is proposed by value chain of Tesco.
Pearce, J.A., & Robinson, R.B. (2013) Strategic Management: Planning for Domestic and Global Competition. (13th Ed.). Boston, MA: McGraw-Hill/Irwin. ISBN-13: 9780078029295
Fast Company,(139), 69-70,73,16. Retrieved from Research Library. Document ID: 1870795761. Wheelen, Thomas L. & Hunger, J. David, (2010). Strategic management and business policy.
Hill, C & Jones, G 2009, Strategic management theory: an integrated approach, Cengage Learning, New York, NY.
These number align with Vo Ltd. price range and varietal profiles. In order to gain competitive advantage, the company need to have a strategy improving on its product pricing without sacrifice the quality. In this sensitive pricing market, the strategic group can be formulated to help Vo Ltd. find a position that can protect the company from above competitors is the Cost Leadership strategy. The company will peruse this strategy to gain advantage in cost and improve products pricing. Following are Vo Ltd. competitive strength: 1.
The tool essentially shows the chain of activities required to develop and deliver the products. The effectiveness of the organization vastly improves when all the key activities such as customer, vendor, suppliers and partner within the value chain working smoothly. The value chain used to reduce operational and production cost using low-cost producer strategy. If two service or products are delivery by two separate divisions for two different markets, there are functionality and process that can be integrated to save cost.
Overall, Costco exploits the Porter’s value chain elements to increase the productivity and efficiency of its operations while also lowering the cost of margins related to the operations of the organization (Guo, 2016). These benefits result in different competitive advantages to the company, which in turn increases the profitability of the organization. For each of the Porter’s value elements, the different stakeholders of the company are also impacted positively. Financial Analysis of Costco Table 1:1 Financial Data in Comparison to the Competitors 2016 2015 2014 Costco Revenue 1620 1467 1350 Net Income 76 72
We evaluated 3 frameworks; The E-commerce Value chain, Porter’s Five Forces and SWOT. Based on pros and cons of each, and decided to go with “SWOT”.
Pearce, J. A., & Robinson, R. B. (2013). Strategic management: planning for domestic & global competition (13th ed.). New York: McGraw-Hill/Irwin.
Witcher, B., and Chau, S. V., 2010. Strategic Management: Principles and Practice. Cengage Learning EMEA.
Explain how the company’s value-chain activities can be better linked to create value for the company.
By adopting the value chain into a manufacturing company, it will gain efficiency, effectiveness, reduce the product cost and improve continuously. For example, Toyota has implemented Toyota Product System (TPS) integrated information system with the business process which allowed the company to be more efficiency, effectiveness and reduce inventory cost. (Toyota
Olav Jull Sorensen (2009): “Formation, Organisation and Management of the (Global) Value Chain I a Theoretical Perspective”