How value chain activities are carried out determines costs and affects profits. These discrete activities involve the acquisition and consumption of resources - money, labour, materials, equipment, buildings, land, administration and management. The ultimate goals in performing value chain analysis are to maximize value creation while also monitoring and minimizing costs. The sources of the competitive advantage of a firm can be seen from its discrete activities and how they interact with one another. In other words, the organization is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain.Ī value chain concentrates on the activities starting with raw materials till the conversion into final goods or services. Margin implies that organizations realize a profit margin that depends on their ability to manage the linkages between all activities in the value chain. The difference between the total value and the total cost performing all of the firm's activities provides the margin. total revenue) that buyers are willing to pay for a firm's product.
Differentiation: selecting the important attributes that buyers want so the company can get a premium price.Cost Leadership: offer the lowest price to customers.Competitive Advantage is the ability for a firm to put "generic strategy" into practice, generic strategy includes: Porter suggested that activities within an organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage.
Value Chain Analysis is mentioned extensively in the first half of the book " Competitive Advantage" in 1985 by Michael Porter. Create Now * What is Competitive Advantage
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