(a) Value chain analysis is a strategic tool used to examine each business
activity to determine how it adds value, helping firms improve efficiency,
identify cost-saving opportunities and gain competitive advantage
through better coordination and performance of internal processes.
FINANCIAL MANAGEMENT AND
STRATEGIC MANAGEMENT
Support Activities in Value Chain Analysis (Michael Porter)
Michael Porter identified four main categories of support activities that
support the primary activities and help the organization achieve
competitive advantage:
1. Procurement: Refers to the processes involved in acquiring the
various resource inputs needed for the primary activities. It focuses
on how resources are sourced rather than the resources themselves.
Procurement occurs across many parts of the organization.
2. Technology Development: Every value activity has an associated
technology or know-how. This includes R&D, product design, process
development and improvements in resources such as raw materials.
Technology development enhances the efficiency and effectiveness of
value activities.
3. Human Resource Management: This area spans across all primary
activities and involves recruiting, managing, training, developing and
rewarding employees. Effective HR management is vital for ensuring
that the organization has the right people to perform its activities
successfully.
4. Infrastructure: Infrastructure consists of the systems and routines
that support the entire organization, including planning, finance,
quality control, information management and organizational culture.
It sustains and coordinates primary and support activities and is
crucial for overall organizational performance.
(b) Differentiation strategy focuses on offering unique products or services to
a broad market, allowing firms to stand out from competitors and charge
premium prices. Uniqueness can stem from design, features, technology
or service.
Major Bases of Differentiation include:
•
Product: Innovative or new products that cater to customer needs
can give a competitive edge. Though expensive in terms of R&D and
marketing, they attract customers.
•
Pricing: Pricing can be used as a differentiator—either through low
prices or premium pricing backed by product superiority.
•
Organisation: Organisational advantages like brand strength,
location or customer loyalty can be used for differentiation.
Strategies to Achieve Differentiation: To achieve differentiation, a firm
may adopt the following strategies:
1.
Offer utility to customers and match products with their tastes and
preferences.
2.
Elevate product performance.
3.
Provide high-quality products/services to ensure buyer satisfaction.
4.
Engage in rapid product innovation to meet changing demands.
5.
Enhance brand image and brand value.
6.
Fix product prices considering product uniqueness and customers'
buying capacity.