Question

Strategic Marketing:

Porter’s Value Chain is made up of Primary Stages and Support Activities.

Use a matrix to show how Porter’s Value Chain can be used to make decisions about which of Porter’s Generic Strategies is appropriate for a company to use.

To do this, set up a table that lists each of Porter’s Generic Strategies as a column heading and each of the primary stages and support activities of Porter’s Value Chain as rows. Fill in the appropriate cells to explain where the value chain analysis may provide insights into the different strategy type options.

Use examples to aid your description.

Word-count: 500 words maximum.

Answer 1

A value chain is an organizational process and operation structure which helps to produce goods and services. Michael Porter described the supply chain as a combination of main and secondary operations. The main responsibilities are the inbound and outbound distribution processes and company promotion and selling. The key goal of these operations is to produce profit greater than the expense of carrying out the exercise. The service functions include handling human capital, recruitment, maintenance, and technical growth. Both exercises are carried out to complement the main programs.

Inbound logistics - It involves the activity of receiving raw material, inventory management, and communication with suppliers.

Operations - It involves the activity of turning raw material into the finished product by using machines, equipment, packaging and facility operations.

Outbound logistics - It involves the activity of storing the finished product and delivering it to the consumer.

Marketing and sales - It consists of activities like brand campaigning, advertising, and selling which are a part of the marketing mix.

Service - It consists of after-sales services like customer feedback, product exchange, repairs, and refunds.

Firm infrastructure - It consists of activities that support the organization in performing its daily operations like administrative handling, line management, and financial management.

Human resource management - It consists of hiring, recruiting, training, coaching of new staff along with compensation-related activities.

Procurement - It involves the activity of buying high-quality raw material at the lowest purchasing cost.

Research and development - It involves the activity of designing and manufacturing new machines for attaining increased efficiency in production processes.

Cost leadership, differentiation, and focus are the three generic strategies that were identified by Michael Porter in 1980. These strategies were used by companies to gain a competitive advantage over their competitors. Michael Porter believed that a company should specialize in a specific strategy and must not try to achieve two strategies at one time which might lead to stuck in the middle scenario.  

How value chain analysis can provide insight into different strategies is as follows:

For example, the companies using cost leadership strategy are characterized by High asset utilization, low production cost, standardized products, simplified processes, low wages, outsourcing, minimal marketing, and advertising activity and bulk procurement.

Lower cost of procurement and transportation along with the use of technologically advanced production methods would help a company to achieve low-cost leadership. This type of strategy is mainly used by companies with standardized processes like Walmart and McDonalds.

In a differentiation strategy, a company offers high-quality products and services to differentiate its products from its competitors. This type of strategy is mainly used by big organizations having more resources. Higher expenditure on human resource management, technological innovation, research, services, and marketing and sales results in the increased price of the products and services offered. This type of strategy is mainly used by companies like Apple and Starbucks.

A focus strategy means offering a product or a service in a niche market. In this strategy, a company offers its products and services to a small underserved consumer segment. It generally uses cost focus or differentiation focus to gain a loyal customer base. In cost focus, the company tries to provide low cost products and services to the narrow consumer market. Similarly, in differentiation focus, the company offers unique products to the consumers. The companies pursuing a focus strategy have low bargaining power but they can pass on the costs to the customers due to the unique nature of demand. This type of strategy is mainly used by companies like TOMS and Ten Tree Apparel.