eleonora escalante, mba - meng · 2018-02-17 · value chain analysis as a tool for competitive...

Eleonora Escalante, MBA - MEngStrategic Corporate Advisory Services

Creating Corporate Integral Value (CIV)

Leg 6. Value Chain Analysis

Value Chain Methodology Approach

Competitive Differentiation Analysis

16 Feb 2018

Cartoon Source: Rethinking the Value Chain. http://www.futurevaluenetwork.com/cartoons/

http://www.futurevaluenetwork.com/cartoons/

OUTLINE Leg 6. Value Chain Analysis

Leg 6. From Hong Kong to Auckland.

Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services

© 2017 Eleonora Escalante-all rights reserved

01Key Concepts

Value Chain

Analysis

06Summary and

Conclusions

02Value Chain

Methodology

Approach

16 Feb2018

03Who Uses Value

Chain Analysis?

04Advantages and

Disadvantages

Value Chain

05Innovating

through Value

Chain Analysis

2

https://support.office.com/es-ES/article/b89770f1-deb1-4a19-94ef-342aa15a4689

OUTLINE Leg 6. Value Chain Analysis




01Key Concepts

Value Chain

Analysis

06Summary and

Conclusions

16 Feb2018

03Who Uses Value

Chain Analysis?

04Advantages and

Disadvantages

Value Chain

05

Innovating

through Value

Chain Analysis

We are here!

3

02Value Chain

Methodology

Approach




Leg 4. From Melbourne to Hong Kong.


4

FIRM INFRASTRUCTURE

HUMAN TALENT DEVELOPMENT AND MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND

LOGISTICS

Purchasing,

Inventory,

Materials

handling

OPERATIONS

OUTBOUND

LOGISTICS

Warehousing

and

Distribution

Sales and

Marketing

Dealer

Support

and

Customer

Service

Pri

mary

Act

ivit

ies

Su

pp

ort

Act

ivit

ies

16-Feb-2018

We are

here!

Let´s start to understand when can we use and how to do a Value Chain Analysis 02Value Chain

Methodology

Approach

Generic Value Chain.

• The VALUE CHAIN

disaggregates a firm

into its strategically

relevant activities in

order to understand the

behavior of costs and

the existing and

potential sources of

differentiation.


Value Chain

Analysis as a

tool for

Competitive

Advantage

1. Cost Analysis

and

Performance

Improvement

2. Competitive

Differentiation

Analysis



© 2017 Eleonora Escalante-all rights reserved 16 Feb2018

We are

here!

The whole idea of Value Chain Analysis is to fragment in pieces all the primary

production activities and functional support activities. Value chain analysis can

be used as an analytical tool in two (2) general situations.

5


02Value Chain

Methodology

ApproachCommon Uses

PROFIT = Price - Cost VALUE = Utility - Price

For the Firm,

we focus on

cost drivers

For the Customer,

we focus in utility

drivers

Maxi

miz

e

Pro

fit

Maxi

miz

e

Valu

e

Today we will start with

the second use of the

VCA: Competitive

Differentiation Analysis





We are

here!

6


02Value Chain

Methodology

Approach

Value Chain

Analysis as a

tool for

Competitive

Advantage

1. Cost Analysis

and

Performance

Improvement

2. Competitive

Differentiation

Analysis

2. Second Use of VCA: From the Customer Point of View: Competitive Differentiation Analysis

VALUE = Utility - Price

For the customer

Maximize• If we wish to maximize

VALUE for the Customer

• Either we Maximize UTILITY

or decrease our PRICE

• We Focus on Utility Drivers





We are

here!

7


02Value Chain

Methodology

Approach

A Differentiation Advantage or Uniqueness just happens when it

is valuable to the buyer.

• A successful differentiator finds ways of creating value for

buyers in a way that yield a price premium in excess of the extra

cost incurred to differentiate from the rest.

• We can´t do a differentiation advantage analysis without

understanding the buyer´s value chain.

• Buyers or consumers have value chains consisting of the

activities they perform just as affirm does.

• A firm´s product or service is a purchased input to its buyer´s

value chain.

• Buyer value chains are for industrial, commercial or institutional

buyers, such as individual consumers who also have value

chain.

• Can we perceive ourselves as entities with a unique value chain?


1. What are the activities of

OUR individual value chain ?

A consumer´s value chain

represents the sequence of

activities performed by a

household and its various

members in which the product or

service fits.





We are

here!

8


02Value Chain

Methodology

Approach


The concept of the Buyer´s perception of value.

“Perceived value is the worth that a product or

service has in the mind of the consumer. For the

most part, consumers are unaware of the true

cost of production for the products they buy;

instead, they simply have an internal feeling for

how much certain products are worth to them”.

Buyers don´t know what is valuable to them, and

they infer or judge subjectively such value.

Value for the

Customer

Buyer´s

Perception of

Value

Utility for the

Customer

Utility

Drivers

Price for the

Customer

Cost Drivers

= -

Utility Drivers are not easy to assess in advance by the

customers.

• Physical Drivers, such as performance, durability,

serviceability can´t be assessed completely “BEFORE” the

product has been purchased or used. Buyers use signals

of value created by the same firm to infer the value.

• Service Drivers, such as delivery or installation, are

utility drivers hidden, and buyers usually don´t measure

them in advance, and the firm can educate buyers to

value them.

• Personnel Drivers, such as courtesy, professionalism and

responsive staff may be a valuable source of uniqueness

in service oriented markets.

• Image Drivers, such as branding, reputation, advertising

and related media are always used for rising the buyer´s

perception of value.





We are

here!

9


02Value Chain

Methodology

Approach


The concept of the Buyer´s perception of value.

“Signals of Value”

Are indications produced by the firm and the

industry in order to expose unrecognized

benefits for the customer.

Buyers will not pay for value they do not perceive,

no matter how real it may be.

The VALUE for the customer (Utility minus Price)

is connected with the signals of value.

Value for the

Customer

Buyer´s

Perception of

Value

Utility for the

Customer

Utility

Drivers

Price for the

Customer

Cost Drivers

= -

Through effective

signaling of value the

company may be

able to command a

price in excess of the

true value. By failing

to signal its value

effectively, a firm

may never realize the

price premium its

actual value

deserves.





We are

here!

The Competitive Differentiation Analysis using the Value Chain can be simplified

in the next 8 main steps:

10


02Value Chain

Methodology

Approach 1. Determine who the real buyer is

2. Identify the buyer´s value chain and the

firm´s impact on it.

3. Determine ranked buyer purchasing

criteria.

4. Assess the existing and potential sources of

uniqueness in a firm´s value chain

5. Identify the cost of existing and potential

sources of differentiation

6. Choose the configuration of value activities

that creates the most valuable

differentiation for the buyer relative to cost

of differentiating.

7. Test the chosen differentiation strategy for

sustainability

8. Reduce cost in activities that do not affect

the chosen forms of differentiation.

FIRM INFRASTRUCTURE

HUMAN TALENT DEVELOPMENT AND MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND

LOGISTICS

Purchasing,

Inventory,

Materials

handling

OPERATIONS

OUTBOUND

LOGISTICS Warehousing

and

Distribution

Sales and Marketing

Dealer

Support

and

Customer

Service

Pri

mary

Act

ivit

ies

Su

pp

ort

Act

ivit

ies





© 2017 Eleonora Escalante-all rights reserved 16 Feb2018 11

Thank you!

On my next post we will continue sailing

with each of the steps on how to do a

Competitive Differentiation Analysis.

Step by step.

In a separate set of slides I have prepared

information about Uniqueness drivers,

this will help us to understand how to do

the step 4 of this section.

All the material

shared today is

from the book

“Competitive

Advantage,

Creating and

sustaining

Superior

Performance”,

From Michael

Porter.

We are

here!

02Value Chain

Methodology

Approach




eleonora escalante, mba - meng · 2018-02-17 · value chain analysis as a tool for competitive...

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