Value Chain Analysis For Business Growth

At HRwisdom we examine different management theories from time to time. Today, HRwisdom contributor Francis Santos is looking at value chain analysis for business growth.

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Over to Francis . . .

How to Enjoy a Competitive Business Edge With Value Chain Analysis 

The business decisions of small and medium-sized companies have a tremendous impact on their competitive standing, profitability, and sustainability. The Porter Value Chain, or value chain analysis, enables these organizations to formulate strategies that help them make more effective decisions. This post will explain what the concept means and how it comes together with the right tools.

What is Value Chain Analysis?

A value chain is essentially an abstract link comprised of all the value-creating activities an organization may engage in. Value Chain Analysis For Business Growth

Depending on the organization, these activities may range from the procurement of raw materials to marketing and delivering the end product or service to customer relations and providing after-sales support. The objective of these activities is not merely to deliver a product or a service to the customer, but create and enhance the value to the point where it will ultimately translate into greater revenue for the company.

Carving Out the Competitive Edge

There are distinct inter-relationships between the wide array of activities in this so-called value chain, including the research and development efforts, procurement of supplies, production line components, marketing, sales, and all the different IT systems that record data about these activities. The challenge for the organization in the center of this madness is maintaining these links and integrating all the activities they support in a single strategy. This is an immensely complex task, but it is also the key to gaining that competitive advantage we mentioned.

The Porter Value Chain concept aims to simplify the grueling aforementioned process by helping the company break down their core activities to better understand the intricacies and the inter-relationships between the distribution channels, the pricing policies, product differentiation approaches, selling propositions, and various other segments within the chain. This in-depth knowledge helps them evaluate how each activity can be improved via cost reduction and/or product differentiation to increase revenue prospects and enhance the user experience.

The Importance of Analysis

A growing number of businesses are feeling the burden that comes with keeping their supply chain in check. According to the findings of a study conducted by Deloitte and published by The Wall Street Journal, executives in companies across multiple industries agree that it is becoming increasingly difficult to manage their extended value chains —  the networks of external vendors, distributors, and customers they depend on to thrive. The most critical problems center on the collaboration between the various links in the supply chain and the absence of end-to-end visibility in the entire product life cycle, the survey found.

There is room for improvement in businesses of all size, from virtually all industries. Unfortunately, this simple aspect is often lost on of some of the most influential figures in the organization. Value chain analysis essentially acts as both a blueprint and a checklist to help companies discover and overcome strategic limitations of activities like those mentioned above and thus be able to devise more focused competitive strategies and implement them more effectively. It gets the attention of key stakeholders and helps them see the value in this added visibility.

Tying It Together with the Right Solutions

Despite its growing importance, the market for value chain analysis tools is thinner than some organizations would like. However, there are a few options. Carrying out  an effective and comprehensive analysis exercise requires real-time access to information and the ability to process these humongous chunks of data within extremely short periods of time. For this reason, some of the best solutions for value chain analysis are the big data systems companies are using to handle the influx of structured and unstructured information. Vendors such as Quantum, Microsoft, and even hardware maker Intel are carving out systems that helps firms conduct proper analysis and clinch that oh-so-important competitive edge you keep hearing about.

Value chain analysis is a powerful tool. Give it the respect it deserves, and it can be highly effective at helping you uncover ways to create and maximize value for both the customer and company alike. By taking an integrated approach to business, it supports improvement from the marketing and delivery of goods to superb customer service after the fact. It can be a challenging endeavor, but with the right tools and sound planning, it’s one that will pay off for some time to come.

Where does your business stand on value chain analysis? Are you pursuing it, or still in the dark?



Francis Santos is the Marketing Manager for Benchmark Events. He graduated from Cal State Long Beach and holds a degree in Journalism. In addition, he is also the executive editor for separate popular news blogs. Follow him on Twitter.

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