Value Chain Analysis
Creating value for customers is tough and demanding; it requires constant monitoring of your business' competitive edge. To stay on top of things, identify areas for improvement, boost efficiency and increase profit margins with our 100% editable Value Chain Analysis presentation. Use this deck to create a robust value chain, build the most customer-focused systems and activities and leave your competitors far behind.
This slide will help you explain the main difference between the value chain and supply chain to your team. The difference is that the supply chain covers activities around the physical product or service, but the value chain covers information flows.
Employ Porter's Five Forces tool to analyze competitive market forces and define new opportunities and identify potential risks. These include current competition within the industry, emerging market entrants and customer bargaining.
With this slide, utilize Porter's Value Chain Analysis Model.The model's strength lays in the fact that it concentrates mainly on customer-centric systems and activities, intead of being concerned with general business categories.
Charles H. Fine, a professor at MIT Sloan School of Management and author of "Clockspeed: Winning Industry Control in the Age of Temporary Advantage" was interviewed about value chain analysis for "MIT Sloan Management Review."
When explaining the term, he said: "[..] Two of the main models [of value chain analysis] to think about are called 'integral value chain architecture' and 'modular value chain architecture.' Those models confront companies with one of the biggest questions: Do we work with the players in our value chain in a collaborative fashion with long-term objectives that are somewhat common, or are each of us out for ourselves in the short run? Is it win-win or zero-sum?"
Fine continued: "If a company working with a supplier says, "If I can force a price cut down your throat, I gain, you lose," it's zero-sum. If a company is saying to its laborers, "I can force a wage cut on you, or I can outsource overseas to find lower wage rates," it's also zero-sum. Zero-sum is modular architecture. Win-win is integral architecture. Among other things, companies that build integral value chains are incentivizing their suppliers to share innovation, because the attitude of the players is, we're all in this together and we benefit collectively from innovation, and there's a long-term trust-based relationship such that I know if I give you an innovation, we'll share the wealth."
The author of "Competitive Strategy: Techniques for Analyzing Industries and Competitors," Michael E. Porter, said: "Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value."
To determine how your venture can deliver that "unique mix of value," first, your team needs to figure out which activities help to add to the company's competitive advantage and which are a subject for some serious upgrade. To complete this, you need to conduct a thorough value chain analysis.
When conducting your value chain analysis, start with these simple steps:
- List all primary activities that create value for your customers
- List all supporting activities that create value for your customers
- Rate the role each activity plays in adding value to the product or service
- List all the impactful causal factors
- List all patterns and dependencies
- List all opportunities for savings and value improvement
Abu Dhabi National Oil Company (ADNOC)
The state-owned oil company, ADNOC, worked with a software solutions platform, AVEVA, to fully align the value of its operations chain, reduce the cost of production and maximize net profit.
In the course of the cooperation, AVEVA utilized its Unified Supply Chain Management solution, which enabled complete value chain optimization and improved collaboration, efficiency and profitability, according to the AVEVA's website.
As a result of the collaboration, an integrated and centralized monthly operating plan for ADNOC was generated, and ADNOC Panorama Unified Operations Center was able to save between $60 to $100 million through optimized operations.