value chain analysis exampleBeing competitive in today’s marketplace means doing more than the other guys. You need to deliver value that exceeds customer expectations, and it’s critical that you only ever perform activities which add value to your final product. This is what value chain analysis is all about, and if you’d like to learn a little more this course is a great introduction as to why it’s beneficial to put your customers first.

Within an organization the value chain is simply all the activities which are performed internally as they transforming raw inputs into finished products. It’s that simple, but this concept is the core of why you are in business. If you don’t know your core process already, this course is great to run through as you create a compelling value proposition, which basically means, why should someone buy your product, over a competitors?

Michael Porter first introduced the concept of the value chain in 1985, and your goal while you are analyzing it is to identify where you can improve and grow your competitive advantage. As you look into all of your processes, you’ll find where your advantages and your disadvantages lie, and then it’s your responsibility to capitalize on them. If your goal is to differentiate, then your overall value goal is to perform all of your activities better than your competition. If you’re looking to compete on cost, you need to perform all of your activities at a lower cost than your competition. As an example, most of the competitive advantage derives directly from technological improvements and innovations, so for a company seeking differentiation, their most important activities are definitely going to be R&D.

Performing a Value Chain Analysis

There are typically two types of competitive advantage that are striven for, cost and differentiation.

To gain a differentiation advantage:

To gain a cost advantage:

In business, the more value you can create, the more your customers will be willing to pay a good price for your products and services. If you exceed the value that all of your competition provides, your clients will continue buying from you. But how does this all apply in practice? Let’s take Starbucks as an example.

Starbucks

Primary activities

Support activities

Based on the mix of activities above, Starbucks has capitalized on an international demand for delicious coffee, that has guests coming back again and again to experience the superior levels of service, and a coffee that always tastes great. If you’re interested in focusing on customer service, this recent post outlines many great ways that you can improve your own organizations customer service.

Pizza Hut

As another example, let’s look at the value chain of Pizza Hut:

Primary activities

Support activities

Based on these activities, Pizza Hut is leading the market in producing pizza that is both affordable, and can be delivered to your door in under 30 minutes (in most cities). This convenience is what sets them apart from many other competing options for meals, like going out to dinner or preparing a meal at home yourself, and they use a strong campaign and marketing focus to entice customers to use them over similar competitors in the fast food delivery industry.

Take the steps outlined above and apply the same methodology to your company. Are you competing on a cost basis, or are you targeting a differentiation strategy? If there are any customers that you can rely on for feedback, it is also worthwhile to present your conclusions to them from your own analysis, to either confirm you’re correct, or to get an even better understanding of what it is that they want. If your business is in the tech industry, or primarily online, you can still create value for customers, this course offers a great insight in how to identify your internet value chain.

Doing a value chain analysis is a fantastic way of following a process to review all of the ways you can generate value for your customers. When you review all of these in detail, you’ll find that you come across many different ways you can satisfy your customers even more. If it’s your first time performing this type of analysis, this course is perfect to teach you the project management skills you need in value chain analysis. Building on this, all you really need to do is take action and make a plan on the changes that are needed within your production process.

Very soon you be excelling in all the things that really matter to your customers. That’s when you’ll have real success!

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