ESNA 200211 - Monica Blaney

transcript

Value Chain Analysis

What can it do for you and your company?

Copyright laney & associates Inc. November 2002

laney & associates Inc

Table of Contents

Competitive Intelligence – what is it?

Value of Competitive Intelligence

Different tools and techniques of Competitive Intelligence

Value Chain Components

Developing your value chain

How a firm can use value chain analysis

Value Chain analysis was first suggested by Michael Porter (1995) as a way of presenting the construction of value as related to end customer.

It can: Increase your competitiveness

It can: Increase your competitiveness Reduce your costs

It can: Increase your competitiveness Reduce your costs Improve your market share

Bottom Line - improve overall profitability!

“The best way to differentiate your company from the competition, the best way to put distance between you and the crowd is to do an outstanding job with information…

How you gather, manage and use information will determine whether you win or lose”

Bill Gates, 1999

Competitive Intelligence is: Information about opportunities and

threats

Competitive Intelligence is: Information about opportunities and threats Leveraging information/knowledge to

improve competitive position of companies and local industries

Competitive Intelligence is: Information about opportunities and threats Leveraging information/knowledge to improve

competitive position of companies and local industries Forecasting of changes about the

economic environment

Competitive Intelligence is: Information about opportunities and threats Information which makes companies and local

industries more competitive Forecasting of changes about the economic

environment Actionable recommendations from

analysis of the environment

It is the total knowledge a company or a local industry possesses about the environment in which it competes

gathered in an ethical manner

Market Intelligence vs Competitive Intelligence

Market Intelligence: Tells a company about the

marketplace

Market Intelligence: Tells a company about its environment

Supply and demand for its products

Supply and demand for its products Drivers that influence demand

Supply and demand for its products Drivers that influence demand Who the buyers and suppliers are

Supply and demand for its products Drivers that influence demand Who the buyers and suppliers are Overall economic outlook for the

product

Supply and demand for its products Drivers that influence demand Who the buyers and suppliers are Overall economic outlook for the product

Competitive Intelligence: Helps a company understand what its

competitive position is in a specific market – weaknesses and strengths

Business Pyramid

Business IntelligenceBroad – environmentalscanning, market researchand analysis

Business Pyramid

Business Intelligence

CompetitiveIntelligence

Assimilates allCompetitive Intelligence

Broad – environmentalscanning, market researchand analysis

Business Pyramid

Business Intelligence

CompetitorAnalysis

CompetitiveIntelligence

Individual CompetitorProfile

Assimilates allCompetitive Intelligence

Broad – environmentalscanning, market researchand analysis

Value of Competitive Intelligence

A study by the University of North Texas found that CICompanies outperformed other companies by all threekey financial measures 1

Market share

Earnings per share

1Steven Miller, Editor Competitive Intelligence Magazine – 1995 study

Different tools and techniques

Five basic tools : Strategic Analysis

Five basic tools : Strategic Analysis Product-oriented Analysis

Five basic tools : Strategic Analysis Product-oriented Analysis Behavioural Analysis

Five basic tools : Strategic Analysis Product-oriented Analysis Behavioral Analysis Financial Analysis

Five basic tools : Strategic Analysis Product-oriented Analysis Behavioral Analysis Financial Analysis Customer Oriented Analysis

It can be developed for individual competitors or an entire industry

It can be for the product as it relates to end customers or customers within a chain

Cost Factors

Why costs differ?

Why swings in profitability?

Efficiencies and inefficiencies

Influence

Competitor’s costs

Nature and source of advantage

The Three Tiers

There are three tiers of Value Chain Analysis

The Three Tiers

Internal Cost Analysis

The Three Tiers

Internal Cost Analysis A firm or a sector needs to understand

its own value chain in order to compare to its competitors

The Three Tiers

Internal Differentiation Analysis

The Three Tiers

Internal Differentiation Analysis A firm or a sector then needs to identify

the processes that distinguish its products or services from that of its competitors

The Three Tiers

Internal Differentiation Analysis

Vertical Linkage Analysis

“ gaining and sustaining a competitive advantage requires that a firm understand the entire value delivery system, not just the portion of the value chain in which it participates. Suppliers and customers and suppliers’ suppliers and customers’ customers have profit margins that are important to identify in understanding a firm’s cost/differentiation positioning, because the end-use customers ultimately pay for all the profit margins along the entire value chain.”

Shank and Govindarajan (1993)

Value Chain Components

Design

Production

Marketing

Distribution

Service

SupplierValueChain

Firm ZValueChain

Distribution ValueChain

Buyer Value Chain

DisposalValue Chain

PrimaryActivities

SupportActivities

Service

Value Chain Analysis for Assessing Competitive Advantage – CMA Handbook

Developing Value Chains

Value Chain Analysis requires expertise in more than one area

Competitive intelligence is to be gathered ethically

And then developing a systematic process for capturing, analyzing it and disseminating the intelligence and developing the appropriate strategies to enhance your competitiveness.

How a firm can use Value Chain Analysis

Three useful strategic frameworks have been identified for value chain analysis:

Industry Structure Analysis

Core Competencies

Three useful strategic frameworks have been identified for value chain analysis:\

Core Competencies

Segmentation Analysis

Michael Porter’s Five Forces Model

Michael Porter (1980, 1985) developed the five forces model. Five factors influence the profitability of a firm Bargaining power of suppliers

Bargaining power of buyers

Threat of substitute products or services

Threat of new entrants

Intensity of Competition

Bargaining Power of Suppliers/Buyers

For Suppliers this includes:

Input differentiation

Supplier concentration

Volume

Cost relative to total dollars

Bargaining Power of Suppliers/Buyers

For Buyers this includes:

Buyer concentration

Volume

Integration

Entry Barriers

Economies of scale

Product Differences

Brand Identity

Access to distribution

Cost advantages

Government policy

Vertical Alliances

Value Chain analysis can show opportunities for participants within the chain that can have an immediate effect on your costs

Real Life Examples

SWATCH

AB originated Beef to L.A. retail stores

Agricultural chemicals sold in the US Midwest

Bibliography

CMA Value Chain Analysis for Assessing Competitive Advantage

Canadian Institute for Competitive Intelligence

SCIP – Society of Competitive Intelligence Professionals email address scipedm@telus.net

Competitive Intelligence Magazine

ESNA 200211 - Monica Blaney

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