Sustainable Competitive Advantage
In today’s era, there is a competition in nearly every industrial
segment. The major Chances to succeed in it, when we must generate value to our
own capabilities.
It is nothing but a way to construct a sustainable competitive advantage. And believe me, if you have that skill then
no one could substitute you. It is an important aspect of all industrial
concerns, academicians, agro and food aspirants, technology concerns, other industries
like automobile, service, textile, financial institutions, or any professional
industry. It also includes Agribusiness firms and students from different
disciplines.
VCA: Value Chain Analysis
The value chain is a combination of different activities that a firm operating in a specific industry performs in order to deliver a valuable product or service.
The concept first of all coined by Michael Porter in 1979 and neatly described in
his best seller book: Competitive advantage in 1985.
In
VCA; there are arrangement and synchronization of three words namely Value,
Chain and Analysis.
Value
is benefit against cost. This means the amount generated against the cost incurred
for the same. A chain is the systematic linkage of the activities which are
needed to run the organization. Whereas, analysis is a set of strategic advancement
with concern to the future for the betterment of industry with the help of
requisite skills.
Hence,
the entire parameter yields the advantage that could be sustained in the coming
future. It paves a way towards SCA; which is useful to differentiate our goods
and services from the other competitors. To achieve and sustain a competitive
advantage and to support that advantage with IT, a firm must understand every
component of the value system.
In
a nutshell VCA is a chain of activities gives the products more added value than a sum of added values of all activities.
So let’s begin with the concept of
Value chain analysis in detail.
There
are two types of different activities in VCA.
1. Primary Activity
2.
Secondary Activity
1. Primary Activity:
There
are five primary activities which are prerequisite in adding value and creating
a competitive advantage with the firm. All are directly linked with the production
and selling of the products.
1.
Inbound logistics: It includes movement of materials, inventory, Semi-Finished Goods,
assembly from suppliers.
2.
Operations: Here the conversion of raw material to finished goods takes place. It
means conversion of resources like men, machine, labor into the tangible goods
and services.
3.
Outbound: It includes storage and movement of final product and related information
to the end-users.
4.
Marketing and sales: marketing is nothing but includes creating, communicating, and delivering value to the customer by value exchange system to maintain the
relationship with customers. With the help of it one could able to identify the
untapped opportunity and promote it via sales.
5.
Service: It includes all activities to keep the product working effectively for
the buyer after it has to be sold. It includes post-sales service and important
for a word of mouth publicity point of view.
Any
or all activities are important to produce the required competitive advantage. Various
technologies used in these activities are as follows.
|
No. |
Activities |
Technology |
|
|
1.
|
Inbound Logistics |
·
Transportation ·
Material Handling ·
Material Storage |
·
Communication ·
Testing ·
Information Systems |
|
2.
|
Operations Tech. |
·
Process ·
Materials ·
Machine Tools ·
Material Handling ·
Information Systems |
·
Packaging ·
Maintenance ·
Testing ·
Building Design and Operation |
|
3.
|
Outbound
Logistics |
·
Transportation ·
Material Handling ·
Packaging |
·
Communication ·
Information Systems |
|
4.
|
Marketing
& Sales
Technologies |
·
Media ·
Audio / Video |
·
Communication ·
Information Systems |
|
5.
|
Service
Tech |
·
Testing ·
|
·
Communication ·
Information Systems |
Many
of these activities are employed at support activities like information systems
and communication also computed aided designs.
2. Supporting Activity process:
All are associated with basic primary activities and support
the value chain as a whole.
1.
Gen. Admin or Infrastructure: It is nothing but the basic infra facilities like
general mgt., accounting, finance, legal, PR, QA, etc. It requires maintaining
daily routine activities.
2.
HRM: Consist of all activities involved in recruitment, selection, training,
appraisal, motivations of an employee. It mainly focuses on the selection of the most
appropriate candidate for the right position at the right time for the
organization.
3.
Tech. Development: It related to the use of equipment, software, technology, process,
standards to convert the Raw material into Finished goods. Mainly deals with the processing of information with technological inputs.
4.
Procurement: Includes acquisition of goods, services, or works from an outside
external source. It involves the decision like purchase, order, in-time
procurement and also useful as a machine, building, lab equipment, etc. It covers the management of vendors and the procurement of raw material with negotiation skills.
5.
Margin: It is present in both primary as well as in secondary activities. It is
nothing but net gain or profit in the business or for the organization.
Each
support activities play a significant role in each primary activity.
The
VCA model is a useful tool for defining a firms core competencies and the activities
by which it pursues an SCA via two modes: Cost Advantage concept an
Differentiation Concept.
A firm may create a cost advantage by reducing the cost of the individual value chain
activities or by reconfiguring the value chain.
A
Differentiation advantage achieved by changing individual value chain activity
to create uniqueness to the product.
Several
Factors enlisted below.
1. Economies
of scale
2. Learning
3. Capacity
utilization
4. Linkages
among activities
5. Interrelationships
among business units
6. Degree
of vertical integration
7. Timings
of market entry
8. Firms
policy of cost or differentiation
9. Geographic
location
10. Institutional
factors like regulations, tax, etc.
Ex.:
McDonald’s sources suppliers for items like vegetables and fruits, meat, coffee
and etc. Hence, able to get low cost and previously selected suppliers as a
part of Inbound Logistics.
Operations
: More than 35000 outlets owned by franchisees.
Outbound
Logistics: Rather than traditional seating arrangement they go for a counter
service and self-service.
Marketing
and Sales: Social media is a major concern for the marketing campaign.
Service:
Focus on the quality and training of the employee which creates a positive impact
on the organization.
VCA
is a system of interdependent activities and that are related by the linkages
within the value chains.
Decisions
taken by one activity may affect the value of other activities. Like correlation
between procurement and operations. Procurement involves the storage of different
raw resources and its quality concerns will affect production cost,
inspection cost, and the main quality of the product. Hence here the ERP system plays
a big role.
It’s
your work to learn these things as generally, no one will teach you that system
in the industry. So behave like an all rounding ability to learn such things.
YouTube Video Link:
https://youtu.be/9kHcmP7JZ7E
Summary:
1. So,
the major learning is to know the correlation between the value chain and look
out the way which solves the purpose effectively.
2. VCA
as a framework to know the organization's concerns.
3. It
gives a clear understanding of where true values lie in the industry and
where cost can be reduced in order to increase the margin.
4. Make
this knowledge as your sustainable competitive advantage (SCA) which promoted
your VALUE.
