Question

Within the Discussion Board area, write 200-300 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.

The line managers in the production department have heard a lot of good things about value chain management. They heard that you have done considerable research on this topic. They have come to your office today to discuss value chain management with you. Complete the following:

Summarize 3 examples of how value chain helps companies become more competitive. You are presenting these to the administrative team from the production department.
Discuss how value chain management helps companies create and build value for their clients and partnering organizations by answering the following questions:

How do you believe value chain management works?
How do you think value chain management can help companies be more competitive?
How do you think value chain management helps companies create and build value?

Answer 1

How value chain management works:

Value chain management is a strategic analysis too offered by Michael Porter. A value chain is the set of activities that are interlinked and create value for the customer. E.g. inbound logistics, manufacturing etc.

Value chain management helps to offers bird’s eye view of the processes taking place in company or business unit. It also helps to zoom in from an integrated view into the details of the process involved in creating value and how each step adds value. This helps to identify the strengths and weaknesses of a company. New entrants can also study value chain of current players. This helps them to formulate a new strategy to play in the industry. They also aid in identifying inefficiencies and in integrating information flow. This helps in integrated planning and scheduling. They also help in the analysis of supply chain and distribution networks. For e.g. (Example 1) a petroleum corporation after an analysis found that inefficiencies in communication lead to wrong forecasting and increase costs. It installed a new communication system to increase efficiency and improve value creation.

value chain management can help companies be more competitive:

The two main competitive advantages are low cost and differentiation. Value chain management helps in cost optimization throughout the entire business function by identifying the inefficiencies in all parts of the chain and removing them. This also helps in decision making regarding outsourcing of non-value added activities and thus follow a low-cost strategy. Differentiation occurs in the way activities are performed, the inter-linkages that exist and the value chain structure. Any of the activities in the value chain may be a differentiating factor.VCM helps to identify them e.g. (Example 1) R$D for Apple, music distribution through iTunes. VCM also helps to identify those that help us to offer differentiation, strengthen them and create new ways to differentiate. It helps us understand how the competitive advantage works for a company.

Value chain management helps companies create and build value:

In value chain analysis, first, we identify the activities and sub-activities. Then we identify the linkages between and them. Then we find analyze where and how is value captured and created. Then the company has to think about ways to try to maximize the value or create new value .for e.g. Apple my think their R&D is their competitive advantage. But through value chain analysis, they also find that their branding(marketing) and high switching costs for consumer (Distribution- switching from i-tunes incurs a high switching cost for the consumer since this has a huge collection of songs better than other players) adds immense value to them. So they can try to strengthen their position through branding and distribution) e.g. including more artist in iTunes)