1. Define value creation and the components that can be used to determine value creation per unit. How is value creation related to competitive advantage?
Value creation is creating value for the customer. Being able to solve or meet the customer requirements. Value is created whenever an action is taken for which the benefit exceeds the cost.
Value creation per unit includes the following components:
• V-P = Consumer Surplus
• P-C = Profit margin
• V-C = Value created where o V = Value o P = Price o C = Cost of production
Value creation can lead to higher sales. In terms of competitive advantage, a product could offer more value to the customer for the same or lower cost. There are two ways this can be broken down: 1. Lower prices to generate demand in the market or 2. Increasing price to reflect higher value.
Higher value can attract more customers or increase the profit margin for the value add benefit.
2. What is a value chain? Why is efficiency so important in an organizations value chain?
Value chain is a set of activities a company performs in order to provide a valuable solution to their customer problem in their market space or industry. The value chain is made up of primary and support activities. Primary activities being research and development, production, marketing and sales and customer service. These are the primary steps that are required to get a product or service to market to solve the customer problems. Some of the secondary steps include company
A value chain analysis is a strategic analysis of an organization that uses value creating activities (Dess, McNamara, & Eisner, 2016, p. 76). The value chain analysis describes a company’s activities and relates them to an analysis of the competitive strength of the company
The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.
The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.
Keane (2008) stated to design, manufacture, promote, offer and facilitate its product or services, all organization engages in some activities. All of these activities of an organization are shown through the use of value chain process. The manner in which organization performs its varying activities along with the firm’s value chain mirrors the organization’s background, strategy along with the way in which the organization executes its strategy. Ponte (2008) stated that the analysis of value chain of an organization is used to develop the organization’s competitive strategies along with formulation the connected and interconnectedness between all the organizational activities that formulate value. Francis, Simons, and Bourlakis (2008) stated that value chain analysis is a helpful tool as an organization looks to attain competitive advantage. Furthermore, Rieple and Singh (2010) stated that a value chain is a useful tool in conceptualizing the varying activities
Value chain is a part of the company’s core competences which plays a very important part to get competitive advantage on its competitors. A value chain is a whole series of activities that create value or add value to the end product. The total value delivered by the company is the sum of the total value built up all throughout the company. Michael porter developed this concept in his 1980 book ‘competitive advantage.
A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael Porter (Porter, 2013)
A value chain is about how to make or create value around your product for the customer.
Value chain is an approach to know how an item or activities create value for consumers. The most of value provides to consumers, the most of competitive advantage an organization build. In this analysis, value chain model has separated into primary and support activities. Primary activities are included in the physical creation of the item and service. On the other hand, support activities give the inputs and infrastructure that enable the primary activities to happen. This value chain model can be refer to below figure 5.
A value chain may defined as network of companies which work hand in hand towards a common goal of meeting the customer demands and the stakeholder demands. The idea of value chain first came into existence after Michael Porter coined it. He basically said that the various activities which the organisations carry out to create and give value to its customers. He said that it basically consists of two main activities which are basically known as the primary activities and secondary activities. The events which take place in converting the inputs to outputs followed up by the delivery and after sales support are known as the primary activities which may include inbound logistics, operations, and outbound logistics, marketing, service. The support activities generally support the primary activities which are handled by the organisations staffs. The support activities involves procurement, technology development, human resource development, firm infrastructure. For example value can be created when a manufacture converts a raw material into a finished product or when a retail stores outlet provide the goods in a way which is convenient to the customers, sometimes supported by a fitting room or personal shopping advise. (Accountants, San Miguel, Canada, & Systems, 1996).
A value chain is the range of activities required to bring a raw product to market. It is in a vertical sequence and is often described as pond to plate, plough to plate, or farm to fork in an agri-business value chain. (Sturgeon, 2001)
Value chain analysis relies on the basic economic principle of advantage — companies are best served by operating in sectors where they have a relative productive advantage compared to their competitors. Simultaneously, companies should ask themselves where they can deliver the best value to their customers.
A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain that companies can use to examine all of their activities, and see how they 're connected. (Mindtoolscom, 2016) The way in which vale chain activities are performed determines costs and affects profits.
Competitive advantage leads to superior profitability. At the most basic level, a company’s profitability depends on three factors: the value customers place on the company’s products, the price that a company charges for its products, and the costs of creating those products. The value placed on a product by customers reflects the utility they get from a product, or the happiness or satisfaction gained from consuming or owning the product. Value must be distinguished from price. Value is something that customers receive from a product. It is a function of the attributes of the product, such as its performance, design, quality etc.
Lysons and Farrington (2012) suggested that the concept of value chain analysis describes the role of activities the organization performs that it will create a product onto customers demand. The value chain was managed activities and a source of competitive advantage. In
Value Innovation: Offering greater value to customers by reducing factors the industry competes on, and raising and offering unoffered factors, those the customer values more.