What is Value Chain Analysis?

Focuses on how a business creates customer value

by examining contributions of different internal
activities to that value
Divides a business into a set of activities within the
business
Starts with inputs a firm receives
Finishes with firms products or services and after-sales
service to customers

Allows for better identification of a firms strengths

and weaknesses since the business is viewed as a
process

SWOT Analysis
Based on assumption an effective strategy derives from a sound
fit between a firms internal resources and its external situation

Numerous environmental
opportunities

A major favorable situation in

a firms environment

Major environmental threats

A major unfavorable situation in a

firms environment

Substantial internal strengths

Critical internal weaknesses

A resource advantage relative

to competitors and the needs of
markets firm serves

A limitation or deficiency in one or

more resources or competencies
relative to competitors

Internal Analysis: Making Meaningful

Comparisons
1. Comparison with past
performance

2. Stages of
industry evolution

Perspectives
to use

3. Benchmarking
comparison with competitors

4. Comparison with
success factors in
industry

Sources of Distinctive Competence at Different

Stages of Industry Evolution
Functional
Area
Marketing

Introduction Growth

Maturity

Decline

Resources/skills
to create
widespread
awareness and
find acceptance
from customers ;
advantageous
access to
distribution

Skills in
aggressively
promoting
products to new
markets and
holding existing
markets; pricing
flexibility; skills
in differentiating
products and
holding
customer loyalty

Cost effective
means of
efficient access
to selected
channels and
markets; strong
customer loyalty
or dependence;
strong company
image

Ability to
establish brand
recognition,
find niche,
reduce price,
solidify strong
distribution
relations, and
develop new
channels

iPOD:

(contd.)

Functional
Area
Production
operations

Introduction

Growth

Maturity

Decline

Ability to
expand capacity
effectively, limit
number of
designs,
develop
standards

Ability to add
product
variants,
centralize
production, or
otherwise lower
costs; ability to
improve product
quality;
seasonal
subcontracting
capacity

Ability to
improve product
and reduce
costs; ability to
share or reduce
capacity;
advantageous
supplier
relationships;
subcontracting

Ability to prune
product line;
cost advantage
in production,
location or
distribution;
simplified
inventory
control;
subcontracting
or long
production runs

(contd.)
Functional
Area
Finance

Introduction

Growth

Maturity

Decline

Resources to
support high net
cash overflow
and initial
losses; ability to
use leverage
effectively

Ability to finance
rapid expansion,
to have net cash
outflows but
increasing
profits;
resources to
support product
improvements

Ability to
generate and
redistribute
increasing net
cash inflows;
effective cost
control systems

Ability to reuse
or liquidate
unneeded
equipment;
advantage in
cost of facilities;
control system
accuracy;
streamlined
management
control

(contd.)
Functional
Area
Personnel

Introduction

Growth

Maturity

Decline

Flexibility in
staffing and
training new
management;
existence of
employees with
key skills in new
products or
markets

Existence of an
ability to add
skilled
personnel;
motivated and
loyal workforce

Ability to cost
effectively,
reduce
workforce,
increase
efficiency

Capacity to
reduce and
reallocate
personnel

(contd.)
Functional
Area

Introduction

Growth

Maturity

Decline

Engineering and
R&D

Ability to make
engineering
changes, have
technical bugs in
product and
process
resolved

Skill in quality
and new feature
development;
ability to start
developing
successor
product

Ability to reduce
costs, develop
variants,
differentiate
products

Ability to support
other grown
areas or to apply
product to
unique customer
needs

Key functional
area and
strategy focus

Engineering:
market
penetration

Sales: consumer Production

loyalty; market
efficiency:
share
successor
products

Finance:
maximum
investment
recovery