Relevance of Value Chain Analysis in Today's Business

by From the Top on 2014-04-24 02:19:28


Harish KumarRelevance of VCA has increased more in today’s world where globalization and information flow has taken the level of competition into a different level altogether. According to Michael Haines, “Value chains are formal linkages of businesses that can meet cost reduction target, improve market efficiencies, enhance customer service, and ultimately improve financial and competitive positions for the organizations participating in the value chain relationship”.

Earlier days companies had the advantage of sustaining their growth as geographic as well as sociopolitical barriers kept the competitors from different geographies out from the markets they operated. The internet, information technology and communication revolution that we have witnessed during the 21 century eliminated most of the entry barriers existed. It is easy for a new competitor to pop up and market its products or services without even physically present in a particular market.

The economy also witnessed a major paradigm shift, now it is known as Knowledge economy. This is because the economy is dominated by the intangible products and services linked with human knowledge and expertise. Material based tangible products shifted to second place when it comes to GDP generation. With the help of improved communication there is an oversupply of information and knowledge readily available.

To convert this knowledge into successful business models require VCA competence. There are copy cats and followers who often pick up a successful model and start competing making it difficult to keep the competitive advantage. The importance of value chain analysis becomes more prominent in this situation, as thoroughly understanding competitors and business context and improving up on the processes is vital for the success of any business. There is a limit to which patents or copy right acts can block an imitation. Imitators are smart enough to make minor modifications to prove the point that it’s a different product.

Continuous improvement and innovations are the most important factors which can support today's business sustain, and to attain this value chain analysis’s support is essential. Gone are the days where first mover had the advantage of dominating the market for years. We have examples before us like Motorola, Ericson, and Blackberry etc., once used to be ahead of competition vanished when I-phone and Samsung came up with innovative products. The current market leaders have to keep on analyzing their value chains and renew their competitive edge to continue as market leaders.

Those companies which create maximum value for their customers will survive and thrive and they will gain progressive competitive advantages in marketplace. (Johnson, W. C. & Weinstein, A., 2004) The new trend is creating an experience that exceeds customer expectations and it applies to all type of business in general.

@Copyright protected by Harish Kumar
Managing Director - Middle East & Africa at Jacobson Global Logistics