Business Strategy and Primary Activities in the Value Chain - Essay Example

While planning for long-term objectives, the company will have to remain competitive. Porter’s value chain provides an important tool for developing and sustaining a competitive advantage for a company. It underlines the need for creating and retailing value for the organization. Value, in general, can be defined in respect of customers, employees, and owners, or other stakeholders. Value addition is considered an important ingredient in dealing with the competition, as it provides the organization with a strategic tool. An individual’s beliefs or conceptions about what is desirable, good, or bad – form the value system (Kotler, 1974). Innovation, excellence, and value go hand in hand in today’s competitive environment. Customers and the target market are crucial stakeholders for any organization. Configuring value means defining, creating, branding, and pricing the offer.

The company can acquire a competitive advantage over its rivals on account of marketing efforts, brand building, value creation, innovation, operational efficiencies, etc. But more important is to sustain the advantage. The value configuration describes how value is created in a company for its customers, how the most important business processes function to create value for customers, and the way a particular company/ organization conducts its business. Some of the value addition gradually takes the form of threshold competencies for the organization, and the consumer starts expecting these value additions from the company. The process of value creation encompasses managing quality in the entire chain of processes leading to the production of the final product or service. Quality in essence is delivering superior value to the customer. The value phenomenon is complicated and multifaceted. The term “value” can be defined in different ways according to the adopted perspective of the analysis: it is possible to determine a “customer value”, a “firm value”, and a “stakeholder value” (Mele and Colurci, 2006). For the companies to identify their sustainable competitive advantage, Michael Porter developed a generic value chain with inter-related activities which are common in many firms. Porter identifies primary and support activities.  Primary activities are the ones that generate a profit margin by adding value. These activities can be instrumental in providing a sustainable competitive advantage for the organization either collectively or individually. Porter’s value chain framework (1985) in general is accepted as the language for representing as well as analyzing the logic of firm-level value creation.

The customer will prefer to deal with a company that values its association with the customer. This will help in retaining the customer base. And loyal customers happen to be good brand ambassadors for a company/ product, which will ultimately help the company in sustaining its competitive advantage. For a customer, value proposition includes, Access to products, need fulfillment, desire fulfillment, increased choice, new consumption patterns, Problem-solving features, and interactivity. In the value chain, value is created in the goods or services through the efficient production of goods and services based on a variety of resources. The company is considered a series or chain of activities. Primary activities in the value chain include;

• Inbound logistics: These include raw material supplies, knowledge sources, consultancies, supplier management, etc.
• Production: After planning out the strategies, the inbound logistics are put to use to give out a finished product or a full-fledged service component.
• Outbound logistics: Outbound logistics include taking care of the distribution network, inspecting the quality of finished goods and services, planning out marketing and sales strategies, etc.
• Marketing and sales: Marketing and sales form an important component of the value chain as it is the main interface between the company and the customer.
• Service: Once the product or service is delivered to the customer, then comes taking feedback from the customer. This has become very important to establish the company’s brand equity and customer loyalty. Futuristic needs are also projected by way of accepting regular inputs from the customer.

Optimum value configuration is achieved by the company with active support from;

• Infrastructure: The company’s infrastructure decides the number of customers it can cater to at a given time and the kind of workload it can take on.
• Human resources: It is said that the strength of a chain is as good as the weakest link. Therefore every element in a value chain has a crucial role to play. To come out with a valuable product human resources need to be made quality and value-conscious.
• Technology development and procurement: Today technology plays an important role in almost every part of the business process. Be it e-procurement, IT-enabled services, e-business, etc. technology has a say everywhere. Therefore a company will have to be technology savvy for being valued as a quality-conscious company.

Value chain, no doubt provides the tool for analyzing the company’s value and cost proposition, but there are certain limitations to the model as well. For one, the model provides a tool for evaluating manufacturing/ production companies, but it proves less helpful for services-oriented companies. Also to accurately find out the competitive position of a company, it involves complex calculations, and at times it may not be possible to do accurate costing for some intermediate products, which may bring about inaccuracies in the final result. Companies and organizations are also affected by the value chains of supporting companies, supplier companies, etc. This may also result in affecting the value proposition of the final product.