value chain generic strategies 2
TRANSCRIPT
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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