Value Chain Management: How Organizatons Can Achieve Competitive Advantage
In 1985, Michael Porter published Competitive Advantage: Creating and Sustaining Superior Performance. In this book, he described how organizations can achieve competitive advantage in their industries. Porter's focus in this book was not on an overall competitive strategy, but on what organizations needed to do on a daily basis to achieve results. As Porter (3) stated, "My aim is to build a bridge between strategy and implementation." To create the link between the overall strategy of a firm and how that strategy could be achieved, Porter referred to value. As Porter (3) stated, "competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it." This focus on value led to the concept of the value chain, which refers to the internal processes that occur as the organization creates its product or service. Value chain management is not just a process that occurs within an organization. Instead, it is closely linked to the competitive environment. This means that value chain management takes into account the industry in which the organization operates. This is referred to as the industry value chain and describes how the industry overall adds valu
Finally, it is useful to consider how value chain management has changed since it was first introduced by Porter in 1985. One of the major changes is that computer software has become an important tool in the process. Computer software has been developed to identify problems and opportunities for improvement in the value chain. This is largely focused on the manufacturing process, but can also be applied to any process where efficiency is desired. Another significant trend is that the value chain is extended further, both upline and downline. For example, many organizations are considering the internal processes of their suppliers. The idea is that if the supplier improves their value chain, the organization that receives the output of the supplier also benefits. In addition, if the supplier can improve efficiency and reduce costs, the benefits can be passed on to the organization by lowering the price of raw materials. The same applies to considering upline organizations, such as distributors and retailers. This is creating an environment where organizations are demanding more from companies that provide them with any type of service. In turn, many companies are becoming less like suppliers and more like partners. This allows the organization to assist supplier companies, while also ensuring that they benefit from the improvements that suppliers make. This creates an environment where organizations are linked together by either formal or informal partnerships. In some cases, both organizations work together to determine how they can best assist each other. In other cases, organizations have contractual demands on their suppliers. In other cases, a formal partnership is in place. In all of these cases, the same trend is seen, with organizations recognizing that other companies are part of their value chain. Porter (39) also identified various generic factors that are part of an organization's value ch
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Approximate Word count = 1303
Approximate Pages = 5 (250 words per page double spaced)
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