Value Chain as a Company Strategy
Now a day, many companies are trying to improve their value chain in order to use the value chain as a strategy in the manner of meeting the customers need and satisfaction. One of the strategies they are using with value chain is to gain competitive advantages for rival among their competitors. Value chain actually can discover and fulfil what customers want and the identification of customer needs will hence become one of the ways to surpass their competitors in term of competitive advantages. Customers can have the best satisfaction of the things that they really want, at an acceptable price level. In other words, a company overall competitive advantage derives from the difference between the values that offers to customers and its cost of creating that customer value. Important of the Concept
The concepts presented can is important to all organizations that produce and sell a product or provide a service. This concept may help companies to understand the value chain approach for assessing competitive advantage associate with the comprehension of the strategic frameworks for value chain analysis which is useful and it may link the value chain analysis to organizational goals, strategies and objectives in maximizing the competitive advantages of the company. Definition of Value Chain
The idea of a value chain was first suggested by Michael Porter (1985). Porter stated that the value chain is the internal processes or activities of a company in order to perform the activities such as design, produce, market, deliver and support its product. Porter divided those activities into two major categories that is the primary activities and support activities. These activities can be classified generally as either primary or support activities. The basic concept is that company activities are divided into nine generic types which are linked to each other and those activities are related to suppliers, channels and buyers. The primary activities consist of five elements that directly link the activities into the products, marketing, logistics and services; each of these primary activities are also link with the support activities that may enhance them in term of efficiency and effectiveness in order to create value.
Process of Creating Value Chain
1) Identify the Competitive Advantage Mode
The strategy of the value chain actually can firstly start with identify the form of competitive advantage among the company. In generally there are two form of competitive advantage of product that is low price strategy and differential strategy. Low price strategy stated that the firm lower down the product price in order to perform competitive advantage in the market. Basically, the company will look for low-price raw materials, innovative processes technology, low-cost distribution channel, customers, superior operating management and etc. For differential advantage, the firm may find the way to produce robust product which may increase the customer value. By doing this, it may increase their product price for making more profit. 2) Value Chain Cost and Activities Analysis
Internal Cost Analysis
Secondly, it’s come to analysis where can we put in our hand for further improvement in order to fulfil the competitive advantages by creating value added activities. The process of value chain analysis actually is related to team effort such as the executive staffs should collaborate with the production and engineering department in order to make the analysis effectively and successfully. Basically, normal framework used to analysis the value chain are activity-based costing, benchmarking, re-engineering, target costing, life-cycle costing, economic value analysis, total quality management for manufacturing firms. Analysis the cost may start from the internal cost such as to find identify the firm’s value-creating processes; determine the portion of the total cost of the product or...
References: 1) Institute of Management Accountants10 Paragon Drive Montvale, NJ 07645-1760 (1996), “Value Chain Analysis for Assessing Competitive Advantage” IMA
2) Khaled Abed Hutaibat (2011), “Value Chain for Strategic Managing Accounting in Higher Education.” Accounting Department, Mu’tah University P.O. Box 2116, Tla Al-Ali (11953), Amman, Jordan.
3) Mustafa Kirli (2009), “The Implementation of Strategic Management Accounting Based on Value Chain Analysis: Value Chain Accounting.”, International Journal of Social Sciences and Humanity Studies vol 3, no 1, 2011 issn: 1309-8063
4) Thompson Peteraf Gamble Stickland, “ Crafting and Executing Strategy”, McGraw-Hill Irwin.
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