ValueThe Key to Differentiation The Central Idea in Strategy

© 2009: James H. Biteman, DBA

What is Value?

Value is what the end consumer pays forValue is what differentiatesValue is created by the activities of the firmValue is co-created by all members of a value chain

Value Relationship

VALUE

VALUE CHAIN

END CONSUMER

Linked Activities

What the consumer pays to receive

Which is More Valuable?

Who Is Your Customer?

If you manufacture women’s clothing, who is your customer?

Label owners?Wholesalers?Large Retailers?

Who Is She?

Young, Professional, Affluent

Desires fashionAdds to clothes she already hasServed by retail / brand owner (Limited, GAP)

What is Value?

DifferentBetterExactly what I want

Value is Different – Examples

Women’s Clothing:In apparel, value is style

Wal*Mart:In mass merchandising, value is certainty

Wal*Mart’s Customer

Family shoppingDaily use itemsValues convenienceDoes not want uncertainty

What is Value at Wal*Mart?

Right brands/productsAdequate selectionEverything I needThe best price

Wal*Mart’s Strategy

Stores are not “interesting”Would introduce uncertaintyStaple items only

Desired brandsAdequate selectionAlways available

Good prices (not the lowest)No specials

Women’s Clothing

Female professionalAppearance is importantLimited resources / timeAdds to an existing wardrobe

Wants to look rightMay not know if item is right until she seesShops to keep wardrobe “fresh”

Competing Brands – Customers

Gap, Inc. – “Old Navy”Limited – “The Limited,” “Victoria’s Secret”Abercrombie & Fitch

Li & Fung – Hong Kong

Value chain coordinatorSourcing agent for brand owner/retailerContracting agent for manufacturer

Builds marginValue of apparel is in style

The right itemAt the right priceIn the right placeAt the right time (no “breakage”)

What is Value?

Value is what the end consumer pays forValue is what differentiatesValue is created by the activities of the firmValue is co-created by all members of a value chain