Sustainable Competitive Advantage through Value Chain Analysis
Introduction To gain a competitive advantage over industrial rivals a company must first understand its core competencies in the internal activities and develop these in order to exploit the opportunities for cost advantages or differentiation. Diagnosing and evaluating the key strengths and weaknesses of a particular company requires the separation of the firm into specific function areas to allow a simplified internal analysis of the companies’ activities. One of the most predominant works concerning this is Michael Porter’s (1985) Value-chain framework. Value-chain Analysis Porters framework provides a systematic basis for segregating a company into its strategically relevant internal activities to enable the company to clearly understand the firm’s sources of differentiation and costs. ... Primary activities are those “directly concerned with creating and delivering a product” (Strategy-value chain) and come under 5 genres; 1. ... Service Secondary activities are those that are not directly involved in production, but, may increase effectiveness or efficiency (Strategy-value chain). ... Infrastructure (Cole, G 1994:59) Note: the “margin” symbolises the difference between the total value (revenue) and the total cost of the activities. The External Value-Chain (the value system) As well as a company examining its internal activities it should also explore the wider value system to include all associated intermediaries which add to the products value such as, suppliers and sales channels as these may also be a source of competitive advantage.