Value Chain Analysis

1061 words - 4 pages

This article explains value chain analysis as a good tool to preparing business strategies. The starting point is the definition of value chain and then giving an example of Ajax Airlines financial statements and situation in order to state the function of value chain analysis. What's more, it states that exporters can capture more earnings through value chain analysis by assessing performance gaps. Last but not least, the value chain approach assists strategy-makers to obtain a comprehensive insight into how sectors can commit to national socioeconomic development by using exports as a tool for development.The Value Chain is useful for defining the firm's core competencies and the activities in which it can pursue a competitive advantage as follows:Cost Advantage- by better understanding costs they can be eliminated from the value adding process and Differentiation- by focusing on those activities associated with core competencies and capabilities in order to perform them better than competitorsA firm may create a cost advantage either by reducing the cost of individual value chain activities or by reconfiguring the value chain. A differentiation advantage can arise from any part of the value chain e.g. procurement of inputs that are unique to competitors. Ultimately, differentiation arises from uniqueness. A differentiation advantage may be gained by changing individual value chain activities to increase uniqueness in the final product or also by reconfiguring the value chain. Frequently, firms gain competitive advantage by conceiving new ways to conduct activities, employing new procedures or utilising different inputs. In some finance firm are currently using strategic cost management (SCM) as a way of gaining competitive advantage and adding value to their business. The term 'margin' is used within the model and implies that organisations realise a profit margin that depends on their ability to manage the linkages between all activities in the value chain. In other words, the organisation is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain.As mentioned, gaining competitive advantage requires that a firms value chain be managed as a system rather than a collection of separate parts. Reconfiguring the value chain by relocation, reordering or even eliminating certain activities can often lead to a major improvement in competitive position. With regard to today's dynamic and fiercely competitive business environment can value chain analysis model help organisations to develop and deliver sustained competitive advantage?In Ajax Airline's case study, it present the fact that most of the companies put more attention on value chain in order to gain a competitive advantage that could keep pace with their major competitors. In Ajax Airline's financial statement clearly reveal that is interesting about the company. It would appear that management has done a...

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