Value Chain as Competitive Advantage

Value Chain as Competitive Advantage
Dennis Stovall
GB570 Managing the Value Chain
Kaplan University



Value Chain as Competitive Advantage
A value chain is a customer fulfillment-'virtual organization'-whose ultimate goal should be to deliver value to a firm's customers by means of controlling costs that enhance the offering of quality products and/or services that meet customers' needs and satisfy their personal utility. A value chain's achievement of success becomes evident during the time when a firm's product offering provides a co-creation proposition, i.e. through product manufacturing, goods distribution and ultimate customer value experience. A firms offering of products and services can provide further value by influencing a customer's lifestyle. This can be accomplished by exceeding their expectations, through initial production cost saving efforts as well as spreading goodwill with regards to the contributions that can be realized-by way of customer input- accomplishable through a coordinated effort on behalf of the value chain as whole.
A firm that endeavors to develop its unique strengths, i.e core competencies, is best able to apply strategic product management techniques such as product differentiation; which is one way for it to establish a competitive advantage with respects its specific industry (Miroslav, Přemysl and Jiří, 2010). A firm that strives to develop and perfect the efficiencies that govern the quality of its value chains processes, for example, through a combination of sharing attributes of its core competencies in conjunction with an effective strategy that facilitates the discovery and development of product innovation, is a firm whose value chain stands the greatest chance of obtaining competitive advantage (Walters & Rainbird, 2007).
Value Chain
A value chain consists of methods that enable the acquisition, input and processing of materials for the purpose of transforming them into a product or service that is available at a desired time and place favorable with consumer's expectancies. This chain of events conceivably must involve a producer's suppliers, manufacturers and its customers in a coordinated effort to achieve maximum effectiveness (Porter, 1993). A firm's value chain is essentially the most efficient and effective means of designing, producing and selling a given quantity of goods or services on the market; in which case value chain's constitute a form of virtual organization in and of themselves. The degree to which a value chain is able to successfully meet customer expectations with regards to all of the aspects that go into making a product available for purchasing, i.e. from its strategic control of product quality and cost control to its supply availability and service support and very importantly its basic brand name competency, constitute the measures by which its value chain's core competencies become recognized in conjunction with the firms brand name reputation.
Competitive Advantage
It is the degree to which a firms value chain becomes proficient at undertaking these processes and the carrying out of subsequent activities that a firm and its value chain become differentiated from that of its competitor; and therein provides the reasoning why its superior reputation (established through its value chain competencies) adds support with respects to establishing its competitive advantage (Miroslav, Přemysl and Jiří, 2010).
Customer Delight
A firm's effort to control its resource expenditures and eliminate unnecessary costs while also providing measures that will improve process efficiencies, such as lean production and just-in time inventory control methods, are just some of the ways a firms value chain activities can develop increased product specialization; which invariably helps to set its value proposition above that of its competitors offerings. The degree of saturation-in this case an exceptional degree- that a firm should strive to strategically achieve with respects to' delighting 'its customers can be increased by means of co-creation within the product design and possibly even the manufacturing processes as well. This layer of improvement with respects to developing higher degrees of saturation can be embraced through allowing more open channels to customer input concerning their co-creational ideas and even expertise with regards to product design and process improvement recommendations. These co-creation measures are usually always affective in enticing customers to become more proactive with regards to product or service choice and overall quality satisfaction with regards to a firms coordination of its value chain's total output (Miroslav, Přemysl and Jiří, 2010).
Inter-relationship of Concepts
The concept of value chain management holds keys to establishing a method in which to first identify and then coordinate reliably effective inter-relationships between various values chain components starting with an organizations supply chain. A model that delineates the stages of maturity necessary for the attainment of a Full Network Collaboration with respects to establishing strong value chain integration among its components has been made available.
Under the maturity model methodology, these essential value chain components which include executive committees and design to procurement to manufacturing and then sales to distribution, and invaraibly CSR departments, lend themselves to a management process that considers the value chain as a whole complete system which can be subjected to an analysis towards progress using a less rigid metrically oriented approach, i.e. using an holistic approach instead.
A significant key to adapting this management approach comes by recognizing the fact that an organization's value chain does in fact extend well beyond the boundaries of the firm itself. These newly recognized areas consist of long-overlooked yet critically important value chain components, e.g. downstream supplier's and their suppliers and upstream retail distributers and their customers to include their customers as well.
An important consideration with regards to this concept is that-'the dimensions and the intricate dynamics that make up a fully accounted for value chain should be treated to a new and as yet investigative approach to analyzing and evaluating a value chains progress'- with the ultimate goal being for it to become a mature and thus fully collaborative networked value chain. A main emphasis to this new management of the whole entire value chain revolves around identifying, improving and innovating ways to enhance customer value and not just through functional tactics which concentrate solely on controlling costs (Harbert, 2009).

Examples of Successful Companies
The P& G Value Chain is an excellent example of a value chain that is controlled from the influence that its management systems place upon the company's demand and supply chain couplings. At both ends of the spectrum, i.e. end-to-end operations with regards to P&G's value chain commitment, is to being the representative of its customer needs and expectations throughout every dimension within its value chain network. The company's use of a system referred to as supply network operations (SNO) is at the heart of their value chain proficiency and their use of Process Engineers and Planners whose roles consists of; leading and planning team activities, and coordinating processes or projects that will reduce cost, improve service, and remove time from the supply chain. Whereby these critical activities keep P&G leading the marketplace in logistics services, by means such as managing logistics information, customer orders, and assuring the prompt distribution of finished products to the company's trade customers and shoppers in context with all of P&G's brands around the world( P&G, 2014)..

Example of Unsuccessful Company
One reason why the attainment of competitive advantage eluded Circuit City is the fact that a good many of their older model retail stores were not strategically located with regards to providing its value chain partners with an infrastructural arrangement that was internally efficient, i.e. supply chain accessible and customer pleasing, with respects to a number of outlets being inconveniently located further away for main thoroughfares and shopping centers as opposed to than many of its competitors stores.
Coupled with this fact are the recessionary effects on some businesses like Circuit City whose 'weaker value chain', which in this case included Circuit's internal supply chain's systems along with its vendors, both of who were likewise unable to recover from the current recessions negative impacts.
Of particular concern with regards to Circuit City and its supplies on credit arrangement it once held with its supplier/vendors is the credit challenges that were exacerbated by the unavailability of credit insurance on the market as well as renewed trust in contract arrangements between circuit and its vendors as a result of effects emanating from the economic downturn (Caldor, 2009).

Conclusion
In reference to Porter's 1985 description of what a modern value chain is taking into consideration the global scale on which it must now perform, he explains that an organizations value system is a fundamentally linked value development and transfer system that culminates in the attainment of its customer's satisfaction. This is accomplished by means of coordinating its intrinsic value chain with those of other affiliated organizations. The main emphasis concerning this arrangement was and still is to combine the strengths of nine in-house (generic) value chain characteristics and integrate them with those of other organizations, which would then constitute a combined network whose purpose is to generate value.
A direct focus upon synchronizing the value chain with its supply chains process is an in-depth study-'rooted firmly in conjunction with Porters concepts'- it thus offers solutions concerning how completive advantage can be achieved through the coordinated efforts placed upon these two major aspects of organization's business processes, which invariably depend upon its ability to achieve superior business performance, through its value chain partnership networks (Feller, Shunk, and Callarman,2006).














References
Caldor. (2009). Circuit City to Slash 155 Stores, Value City is Done. Source: Labelscar, The Retail History Blog. Retrieved from http://www.labelscar.com/retail-news/circuit-city-closing-155-stores
Chodúr, Miroslav; Pálka, Přemysl; Svoboda, Jiří. (2010). "Proceedings of the European Conference on Management, Leadership & Governance". P439-442.
Feller, A. Dr. Dan Shunk, D.PhD. and Callarman, T. PhD. (2006). "Value Chains Versus Supply Chains". Source: BPTrends.
Harbert, T. (2009). Why the Leaders Love VALUE CHAIN. Source: Supply Chain Management Review. Reed Elsevier, Inc.
P&G. (2014). Our Functions. Retrieved from http://www.pg.com/vn/careers/our_functions/supply_network_operation.shtml
Porter, M.E. (1993) Konkurenční výhoda: jak vytvořit a udržet si nadprůměrný výkon, Victoria Publishing, Praha.
Walters, D., & Rainbird, M. (2007). Strategic operations management: A value chain approach. New York: Palgrave Macmillan.




VALUE CHAIN AS COMPETITIVE ADVANTAGE 2
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Running head: VALUE CHAIN AS COMPETITIVE ADVANTAGE 1