Value Chain Analysis: Improving Business Performance Effectively

This essay provides an in-depth analysis of how Value Chain Analysis (VCA) serves as an effective tool for enhancing business performance. It evaluates VCA's contribution to achieving both differentiation and cost advantages, emphasizing its role in strategy implementation for competitive advantage. The essay discusses Porter's Value Chain Model, highlighting the importance of primary and support activities in improving business performance. It outlines steps for gaining differentiation and cost advantages through VCA, including identifying value-creating activities, assessing differentiation strategies, and recognizing cost drivers. Furthermore, the essay underscores the significance of VCA in the era of globalization, where increased competition necessitates tools like VCA for reducing production costs, attracting customers, and achieving sustained income. The conclusion reinforces VCA as a vital instrument for managing business activities and driving performance improvement.

“VALUE CHAIN ANALYSIS-A TOOL FOR
ENHANCING BUSINESS PERFORMANCE”
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INTRODUCTION
Value Chain Analysis is an effective tool that helps to improve
performance of business. This study is focusing on evaluating the
contribution of value chain analysis in obtaining both differentiation
and cost advantages. In addition, Porter’s value chain model is being
discussed to help in understanding importance of primary and support
activities in improving performance.

DEFINING VALUE CHAIN ANALYSIS
(VCA)
• Value chain analysis can be defined as a
process to separate business activities in
primary and support activities.
• This analysis model is capable to help
firms to perform each action with
efficiency (Grant, 2010).
• This aspect is potent enough to ensure
improvement of business performance and
it helps to generate maximum revenue.

CONTRIBUTION OF VCA IN GAINING
COMPETITIVE ADVANTAGES
• VCA helps in choosing and
implementing effective strategies to
obtain maximum competitive advantages.
• Implementation of strategy related to cost
advantage helps to perform internal
activities at lower expense than rivals
(Sausman et al. 2015).
• Differentiation strategy implementation
helps to improve performance of business
activities more than rivals.

STEPS TO GAIN DIFFERENTIATION
ADVANTAGES
Following steps are performed by organizations
to achieve differentiation advantages and VCA
helps to identify related activities,
•Identification of value-creating activities of
customers
•Assessment of differentiation strategies
•Identification of best differentiation strategy
•Implementation of recognized strategy to
improve business performance (Mustapha,
2016).
•Monitoring effectiveness of implemented
strategies

STEPS TO GAIN COST ADVANTAGE
• Following steps are performed by firms to
gain cost advantages and VCA helps in
this regard,
• Recognizing support and primary
activities
• Establishing significance of activities in
total production cost
• Identification of cost drivers for activities
(Jaligot et al. 2016)
• Understanding Connection between
activities
• Recognizing opportunities to reduce
production cost

PORTER'S VALUE CHAIN MODEL
• Porter has developed this model in 1985
to help in identifying primary and
support activities of business
• Primary activities add direct values to
production process and help in
improving business performance.
• Support activities are concerned with
adding values indirectly (Lee et al.
2017).
• Management of primary activities is
easier than supportive activity
management.

(CONTD...)
• Expense of each primary activities can be calculated easily and
these activities are considered as source of cost.
• Support activities are main source of differentiation advantages.
• Organizations perform primary activities to gain cost advantages by
meeting expectation of customers (Sausman et al. 2015).
• Performing support activities allows organization to improve
business performance through obtaining differentiation advantages.

IMPORTANCE OF VCA IN THE ERA OF
GLOBALIZATION
• Competition in global business
marketplace has increased and firms are
investing capital to beat their competitions.
• VCA is being used as important tool by
organizations to become competitive by
nature.
• This tool is helping in reducing production
cost and helps firms to offer affordable
product cost to customers (Lee et al.
2017).

(CONTD…)
• Setting lower product price helps to
attract maximum customers and in
beating competitors.
• Companies are being able to enter into
global marketplace by improving
performance of firm (Grant, 2010).
• VCA is helping to achieve sustained
income for long term period and it is
helping organization to be competitive.

CONCLUSION
The entire discussion of this study has helped to conclude that
Value Chain Analysis can be considered as an effective tool that
helps in improving business performance. It is easier to identify
and perform both supportive and primary activities by firm with
the help of VCA. Hence, VCA is helping in managing business
activities, which is helpful for performance improvement.

REFERENCE LIST
Grant, R., 2010. Comporary Strategy Analysis 7th Edition. John Wiley & Sons
Jaligot, R., Wilson, D.C., Cheeseman, C.R., Shaker, B. and Stretz, J., 2016. Applying value chain analysis to informal sector
recycling: A case study of the Zabaleen. Resources, Conservation and Recycling, 114, pp.80-91.
Lee, K., Go, D., Park, I. and Yoon, B., 2017. Exploring Suitable Technology for Small and Medium-Sized Enterprises (SMEs)
Based on a Hidden Markov Model Using Patent Information and Value Chain Analysis. Sustainability, 9(7), p.1100.
Mustapha, Y.I., 2016. Value Chain Analysis and the Performance of Small Scale Agri-business: Evidence from Cultured Fish
Farmers Kwara State. JOURNAL OF MARKETING, 1, p.2.
Sausman, C., Garcia, M., Fearne, A., Felgate, M., El Mekki, A.A., Cagatay, S., Soliman, I., Thabet, B., Thabet, C., Saïd, M.B. and
Laajimi, A., 2015. From value chain analysis to global value chain analysis: Fresh orange export sector in Mediterranean partner
countries. In Sustainable Agricultural Development pp. 197-225