The Value Chain Competitive Advantage 1 Learning Objectives Describe each of the components of the Value Chain model and how they fit together Define competitive advantage Compare and contrast the different kinds of competitive advantage First mover Sustainable Product vs Process based advantage 2 Implementing the Strategy Once you examine your industry and select develop your competitive strategy Five Forces you must reflect your strategy in all your operations Shared Vision To help do this Porter developed the concept of the Value Chain 3 Value Chain Value chain views an organization as a series of processes each of which adds value to the product or service for each customer 4 Value Added Benefit Note that the business will cease to exist if the value added is insufficient Big Three car companies Note also that people do not buy products and services they buy a BENEFIT It seems that a lot of marketing is to identify or create a benefit Examples 5 Activities In the Value Chain Primary Activities Supply Chain touches the product 6 Activities In the Value Chain Support Activities across supply chain Contribute to Margin Value but in an indirect often hard to measure way IS Technology is imbedded in all activities 7 Modeling Processes Okay so this takes you to the next logical step model the processes Sample inventory management process 8 IS Process Models And then finally to how IS impacts these processes How are the processes executed Human vs Machine 9 Samples of IS Manual Process Balanced typical Purchasing System 10 Quotes From Investing in IT that makes a Competitive Difference McAfee Brynjolfsson The firm with the best processes will win in most or all markets However our findings show that the internet and enterprise IT are now accelerating competition within traditional industries in the broader U S economy Why Not because more products are becoming digital but because more processes are 11 Choosing Many organizations typically offer the product or service you the customer are looking for Why would you choose one vendor over another 12 Competitive Advantage To survive and thrive an organization must create a competitive advantage Competitive advantage a product or service that an organization s customers place a greater value on than similar offerings from a competitor The organization must examine the parts of the value chain and see if there are opportunities to do better than the competition 13 Sustainable Competitive Advantage A factor or set of factors can lead to sustainable competitive advantage if Affects firm value in a positive way advantage Not too many competitors can imitate it competitive Can keep it up sustainable Examples of sustainable competitive advantage Patents Pfizer Viagra Market control De Beers diamonds OPEC oil Superior procedures Wal Mart supply chain 14 Sustainable Competitive Advantage Sustainable Competitive Advantage is hard to achieve even harder to hold onto Sustainable Competitive Advantage can be achieved through a variety of ways superior customer service example superior product quality example superior cache image example 15 First Mover First mover advantage occurs when an organization can significantly impact its market share by being first to market with a competitive advantage Does first mover always win Examples 16 Resource based view of competitive advantage Resource based view of competitive advantage The strategic thinking approach suggests that if a firm is to maintain sustainable competitive advantage it must control an exploitable resource or set of resources that have four critical characteristics Valuable Rare Imperfectly imitable Nonsubstitutable 2 17 Product Process View 18 Product Based Competitive Adv 1st three items on list New Product or Service iTunes Enhance Product or Service OnStar service on GM vehicles Differentiate Mac cooler more secure 19 Process Based Competitive Adv Next 5 items on list Lock in customers Microsoft Windows on PCs high switching cost Lock in suppliers Hard way contract or soft way easy to work with Raise Barriers to Entry Be so good no one wants to take you on FedEx Establish Alliances Blu Ray vs HD DVD Reduce Costs Wal Mart 20 Examples of Value Chains What kind of competitive advantage does Apple have Tiffany Jewelers 21
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