value chain generic strategies 2

8/8/2019 Value Chain Generic Strategies 2

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VALUE CHAINVALUE CHAIN

GENERICGENERICSTRATEGIESSTRATEGIES


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Support

Activities

Primary Activities

Technological DevelopmentTechnological Development

HumanHumanResourceResourceManagementManagementFirmFirmInfrastructureInfrastructure

ProcurementProcurement

Inbou n

d

Inbound

Logis t

ics

Logis t

ics

Oper

ations

Operation

s

Outbou

nd

Outb

ou

nd

Logis ti

cs

Logistics

Mark

eting

Market

ing

&Sales

&Sa l

es

Service

Servi c

e

MARG

IN

MARG

IN

MARGI

N

MARGIN

Value Chain AnalysisValue Chain AnalysisIdentifying Resources and Capabilities That Can Add Value


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Competitive Advantage & CoreCompetitive Advantage & Core

CompetenceCompetence A competitive advantage is a position ofA competitive advantage is a position of

superiority on the part of the firm in somesuperiority on the part of the firm in somefunction /factor/ activity/ in relation to itsfunction /factor/ activity/ in relation to itscompetition. It is this superiority that enablescompetition. It is this superiority that enables

the firm to survive, grow and excel in athe firm to survive, grow and excel in acompetitive market.competitive market.

The superiority can be in any function such asThe superiority can be in any function such asmanufacturing, marketing, finance, HRM, or amanufacturing, marketing, finance, HRM, or acombination. Intellectual property, knowledge,combination. Intellectual property, knowledge,

or any factor of production can give aor any factor of production can give acompetitive advantage.competitive advantage.

Thus competitive advantage is a superiorThus competitive advantage is a superiorposition relative to competition.position relative to competition.


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Com. Adv.( con )Com. Adv.( con )

Sources of CA :Sources of CA :MARKETINGMARKETING

FINANCEFINANCE

PRODUCTIONPRODUCTION

R& DR& D

HRHR

THE CEO & LEADERSHIPTHE CEO & LEADERSHIP

LOCATION & Many more.LOCATION & Many more.


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Core CompetenceCore Competence

A firm may loose the CA as competitorsA firm may loose the CA as competitors

will catch up after some time. Thereforewill catch up after some time. Therefore

to keep up the position the firm shouldto keep up the position the firm should

develop some unique strength . This isdevelop some unique strength . This isknow as CORE COMPETENCE .know as CORE COMPETENCE .

An enduring competency that cannot beAn enduring competency that cannot be

easily imitated.easily imitated.

A competency that lies at the root ofA competency that lies at the root of

products.products.


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ResourcesResources

** TangibleTangible

** IntangibleIntangible

CapabilitiesCap

abilities

Teams ofResourcesTeams ofResources

Sources ofSources of

CoreCore

CompetenciesComp

etencies

CompetitiveCompetitiveAdvantageAdvantage

StrategicStrategicCompetitivenessComp

etitiveness

Above-AverageAbove-AverageReturnsReturns

CompetitiveCompetitiveAdvantageAdvantag

e

Gained throughGained throughCore CompetenciesCore Competencies

DiscoveringDiscoveringCoreCore

CompetenciesCompetencies

Discovering Core

Competencies

Discovering Core

Competencies

Criteria of

SustainableAdvantages

Value

ChainAnalysis

Valuable

Rare

Costly to ImitateNonsubstitutable

*

*

**

* Outsource


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Generic Business Level StrategiesGeneric Business Level Strategies

CostCost UniquenessUniqueness

Source of Competitive AdvantageSource of Competitive Advantage

Breadth ofBreadth of

CompetitiveCompetitive

ScopeScope

BroadBroad

TargetTarget

MarketMarket

NarrowNarrow

TargetTarget

MarketMarket

Focused

Differen-

tiation

Focused

Differen-

tiation

CostLeadership

CostLeadership

Differen-tiation

Differen-tiation

Focused

Low Cost

Focused

Low Cost

CostCostLeadershipLeadership


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How to Obtain a Cost AdvantageHow to Obtain a Cost Advantage

1. Determine and Control Cost Drivers1. Determine and Control Cost Drivers

2. Reconfigure the Value Chain as needed2. Reconfigure the Value Chain as needed

Alter production processAlter production process

Change in automationChange in automation

New distribution channelNew distribution channel

Direct sales in place ofindirect salesDirect sales in place ofindirect sales

New advertising mediaNew advertising media

New raw materialNew raw material

Backward integrationBackward integration

Forward integrationForward integration

Change location relativeto suppliers or buyersChange location relativeto suppliers or buyers


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Key Criteria:Key Criteria:

Cost Leadership Business Level StrategyCost Leadership Business Level Strategy

Relatively standardized productsRelatively standardized products

Features acceptable to many customersFeatures acceptable to many customers

Lowest competitive priceLowest competitive price


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Major Risks of Cost LeadershipMajor Risks of Cost Leadership

Business Level StrategyBusiness Level Strategy

Major Risks of Cost LeadershipMajor Risks of Cost Leadership

Business Level StrategyBusiness Level Strategy

DramaticDramatic technological changetechnological change could takecould take

away your cost advantageaway your cost advantage

Competitors may learn how toCompetitors may learn how to imitateimitate

Value ChainValue Chain

Focus on efficiency could cause Cost LeaderFocus on efficiency could cause Cost Leader

toto overlookoverlookchanges in customer preferenceschanges in customer preferences


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Differentiation Business Level StrategyDifferentiation Business Level Strategy

Requirements:Requirements:

Constant effort to differentiate products through:Constant effort to differentiate products through:

Developing new systems and processesDeveloping new systems and processes

Quality focusQuality focus

Maximize Human Resource contributionsMaximize Human Resource contributionsthrough low turnover and high motivationthrough low turnover and high motivation

Capability in R&DCapability in R&D

Shaping perceptions through advertisingShaping perceptions through advertising


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Key Criteria:Key Criteria:

Differentiation Business Level StrategyDifferentiation Business Level Strategy

Value provided by unique featuresand value characteristicsValue provided by unique featuresand value characteristics

Command premium priceCommand premium price

Superior qualitySuperior quality

Rapid innovationRapid innovation

Prestige or exclusivityPrestige or exclusivity

High customer serviceHigh customer service


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Drivers of DifferentiationDrivers of DifferentiationDrivers of DifferentiationDrivers of Differentiation

Unique product featuresUnique product features

Unique product performanceUnique product performance

Exceptional servicesExceptional services

Quality of inputsQuality of inputs

New technologiesNew technologies

Exceptional skill or experienceExceptional skill or experience

Detailed informationDetailed information

Examples:Examples:


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Customers may decide that the

cost of uniqueness is too great

Customers may decide that the

cost of uniqueness is too great

The means of uniqueness may no

longer be valued by customers

The means of uniqueness mayno

longer be valued by customers

Competitors may learn how to

imitate Value Chain

Competitors may learn how to

imitate Value Chain

Major Risks of a Differentiation

Business Level Strategy

Major Risks of a Differentiation

Business Level Strategy

value chain generic strategies 2

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