Value Chain Analysis: Enhancing Business Performance

“VALUE CHAIN ANALYSIS-A TOOL FOR ENHANCING
BUSINESS PERFORMANCE”
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Introduction
Value chain analysis (VCA) is an effective strategy tool, which is used for analyzing internal
activities of a company. Main objective of this analysis is to find out importance of different
activities in a firm. Management of an organization can be able to recognize the internal
activities that are most valuable, which can help to gain cost or differentiation advantage.
Moreover, clear knowledge about firm's activities that need to be improved is obtained through
application of this tool. This essay focuses on VCA implications that help in enhancing business
performance of a firm.
Value chain analysis is a technique that helps a firm to identify different primary and support
activities, which helps in adding value to the final product (Grant, 2010). On another hand,
value chain can be defined as different internal activities, which a firm operates for transforming
inputs to output. A firm generally analyzes its value chain to evaluate critically every step of
production. Hence, any as in production can be identified and proper step can be taken to
mitigate these gaps. Thus, increase in overall performance of a firm can be noticed. This tool
helps to analyze whether value created from operations exceeds costs. Mainly there are five
primary value chain activities, which can be analyzed by a firm to ensure that the value is
exceeding the cost (Sausman et al. 2015). This cost has been invested in creating value. Different
value chain activities are inbound logistics, outbound logistics, operation, service and marketing,
and sales.
VCA tools also help a company to create an advantage in any of the primary activities. This, in
turn, creates a competitive advantage and impacts in profit level of the firm. If a firm operates by
adopting a differentiation advantage strategy, then they will try to improve their activities better
than other competitors in the market. Moreover, Jaligot et al. (2016) argued that if a firm
operates with the help of cost advantage strategy, then they will try to conduct internal activities
at much lower costs as compared to market competitors. If a firm is able to produce products at
lower costs and offer high-quality products at low costs. The acceptability and brand image of
that firm increases, which ultimately impacts on profit level by increasing revenue. Hence, VCA
can be applied to increase competitive advantage of a company.
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