Question

Value is the amount that buyers are willing to pay for what a firm provides them. Creating value for buyers that exceeds the costs of production is a key concept used in analyzing a firm’s competitive position. Suggest and critically discuss in details an approach useful for understanding the value creation building blocks that could secure competitive advantage. (250 words)

Answer 1

Value creation is the main goal of any business organization. In the context of customers, value creation enables the selling of products and services that a business has to offer. In the context of shareholders, creating value by increasing share prices ensures that the company obtains the capital that is required to fund its activities. From a financial standpoint, value creation occurs when the revenue generated by a firm exceeds its expenses.

The initial step for any business in achieving value creation is researching its industry, company, and marketplace. This research is useful in understanding the motivators of value creation within the business environment and enables the organization to allocate its time and resources accordingly. For a company like Apple, the customers value its innovative products. Therefore, skills, systems, and people that are able to deliver innovative products with superior functions assume high value. Valuing the needs of the customers is a definite and universally accepted way to achieve success. Along with the expenses of the internal departments, it is also imperative to gauge the benefits that the product will provide to the customers.

If the product of an organization provides something to the customers that they value, then they will never go to someone else. A product of exceptional value practically sells itself and the more substantial value offered, the more a customer will pay for it. This is the core concept applied by Apple. It constantly focuses on developing innovative products to create value in the eyes of its customers, and this approach has given the company a huge number of loyal customers who are willing to purchase its products regardless of their price. It has made Apple a dominant leader in the smartphone segment and it has achieved an unparalleled level of brand loyalty.