Value Chain Analysis What can it do for you and your company?

Transcription

Value Chain Analysis
What can it do for you
and your company?
Copyright 
laney & associates Inc. November 2002
Table of Contents


Competitive Intelligence – what is it?

Value of Competitive Intelligence

Different tools and techniques of Competitive Intelligence


Value Chain Components

Developing your value chain

How a firm can use value chain analysis

laney & associates In
Value Chain analysis was first suggested by
Michael Porter (1995) as a way of
presenting the construction of value as
related to end customer.

Value Chain analysis was first suggested by Michael Porter
(1995) as a way of presenting the construction of value
as related to end customer.
It can:
 Increase your competitiveness

It can:
 Reduce your costs

It can:
 Improve your market share

It can:
 Improve your market share
Bottom Line - improve
overall profitability!

“The best way to differentiate your company from
the competition, the best way to put distance
between you and the crowd is to do an
outstanding job with information…
How you gather, manage and use information will
determine whether you win or lose”
Bill Gates, 1999

Competitive Intelligence is:
 Information about opportunities and
threats

 Information about opportunities and threats
 Leveraging information/knowledge to
improve competitive position of
companies and local industries

 Leveraging information/knowledge to improve
competitive position of companies and local industries
 Forecasting of changes about the
economic environment

 Information which makes companies and local
industries more competitive
 Forecasting of changes about the economic
environment
 Actionable recommendations from
analysis of the environment

It is the total knowledge a
company or a local industry
possesses about the environment in
which it competes
gathered in an ethical manner

Market Intelligence vs
Competitive Intelligence
Market Intelligence:
 Tells a company about the
marketplace

 Tells a company about its environment
 Supply and demand for its
products

 Supply and demand for its products
 Drivers that influence demand

 Who the buyers and suppliers are

 Overall economic outlook for the
product

 Overall economic outlook for the product
Competitive Intelligence:
 Helps a company understand what its
competitive position is in a specific
market – weaknesses and strengths

Business Pyramid
Business Intelligence
Broad – environmental
scanning, market research
and analysis

Business Pyramid
Competitive
Intelligence
Assimilates all
and analysis

Business Pyramid
Competitor
Analysis
Individual Competitor
Profile
Competitive
Intelligence
Assimilates all
and analysis

Value of Competitive Intelligence
A study by the University of North Texas found that CI
Companies outperformed other companies by all three
key financial measures 1
 Sales
 Market share
 Earnings per share
1Steven
Miller, Editor Competitive Intelligence Magazine – 1995 study

Different tools and techniques
Five basic tools :
 Strategic Analysis

Five basic tools :
 Product-oriented Analysis

Five basic tools :
 Behavioural Analysis

Five basic tools :
 Behavioral Analysis
 Financial Analysis

Five basic tools :




Strategic Analysis
Product-oriented Analysis
Behavioral Analysis
Financial Analysis
 Customer Oriented Analysis

Five basic tools :




Strategic Analysis
Product-oriented Analysis
Behavioral Analysis
Financial Analysis
 Customer Oriented Analysis
 Value Chain Analysis

 It can be developed for individual
competitors or an entire industry


It can be developed for individual competitors or an entire
industry
 It can be for the product as it relates to
end customers or customers within a
chain

 Cost Factors
 Why costs differ?
 Why swings in profitability?
 Efficiencies and inefficiencies
 Influence
 Competitor’s costs
 Nature and source of advantage

The Three Tiers
There are three tiers of Value Chain Analysis

The Three Tiers
 Internal Cost Analysis

The Three Tiers
Internal Cost Analysis
 A firm or a sector needs to understand
its own value chain in order to compare
to its competitors

The Three Tiers
 Internal Differentiation Analysis

The Three Tiers
Internal Differentiation Analysis
 A firm or a sector then needs to identify
the processes that distinguish its
products or services from that of its
competitors

The Three Tiers
 Internal Differentiation Analysis
 Vertical Linkage Analysis

Vertical Linkage Analysis
“ gaining and sustaining a competitive advantage
requires that a firm understand the entire value
delivery system, not just the portion of the value
chain in which it participates. Suppliers and
customers and suppliers’ suppliers and
customers’ customers have profit margins that are
important to identify in understanding a firm’s
cost/differentiation positioning, because the enduse customers ultimately pay for all the profit
margins along the entire value chain.”
Shank and Govindarajan (1993)

Value Chain Components
End-Use Consumer Pays for Profit Margins Throughout the Value Chain
Primary
Activities
Supplier
Value
Chain
Support
Activities
R&D
Service
Firm Z
Value
Chain
Design
Service
Production
Distribution
Value
Chain
Marketing
Buyer
Value
Chain
Disposal
Value
Chain
Distribution
Service
Service
Service
Value Chain Analysis for Assessing Competitive Advantage – CMA Handbook

Developing Value Chains
Value Chain Analysis requires expertise in
more than one area

Value Chain Analysis requires expertise in more than one
area
Competitive intelligence is to be gathered
ethically

Value Chain Analysis requires expertise in more than one
area
Competitive intelligence is to be gathered ethically
And then developing a systematic process for
capturing, analyzing it and disseminating
the intelligence and developing the
appropriate strategies to enhance your
competitiveness.

How a firm can use Value Chain Analysis
Three useful strategic frameworks have been
identified for value chain analysis:

 Industry Structure Analysis

 Core Competencies

identified for value chain analysis:\
 Core Competencies
 Segmentation Analysis

Michael Porter’s Five Forces Model
Michael Porter (1980, 1985) developed the five forces
model. Five factors influence the profitability of a
firm
 Bargaining power of suppliers
 Bargaining power of buyers
 Threat of substitute products or services
 Threat of new entrants
 Intensity of Competition

Bargaining Power of Suppliers/Buyers
For Suppliers this includes:
 Input differentiation
 Supplier concentration
 Volume
 Cost relative to total dollars

Bargaining Power of Suppliers/Buyers
For Buyers this includes:
 Buyer concentration
 Volume
 Integration

Entry Barriers
 Economies of scale
 Product Differences
 Brand Identity
 Access to distribution
 Cost advantages
 Government policy

Vertical Alliances
Value Chain analysis can show opportunities for
participants within the chain that can have an
immediate effect on your costs

Real Life Examples

SWATCH

IKEA

FedEx

AB originated Beef to L.A. retail stores

Agricultural chemicals sold in the US Midwest

Bibliography

CMA Value Chain Analysis for Assessing Competitive
Advantage

Canadian Institute for Competitive Intelligence

SCIP – Society of Competitive Intelligence Professionals
email address scipedm@telus.net

Competitive Intelligence Magazine


Value Chain Analysis What can it do for you and your company?

Transcription

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