Analyze how elements of the value chain interact to create competitive advantage

Karan Desai

GB570-M1 Competitive Advantage and the Value Chain

June 19, 2023

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Describe an example of customer delight from your own purchase experience. Identify at

least three of the 21 elements of the contemporary value chain model and then relate the

direct positive effect these elements had upon your delightful purchase experience.

I consider the AirPods Pro I purchased last year an example of customer delight. This

positive experience was the result of the following value chain elements working well:

● Customer need – Apple management understood customers’ needs to listen to calls or

music, have good sound quality, cancel out external noise, listen and talk easily on-the-

go, do so for an extended period of time, be able to recharge the headphones quickly, and

pay a fair price for them

● Idea generation – Apple management ideated ways to ensure the AirPods connect

wireless to smartphones, provide noise cancellation, and have 24-hour battery life

● Supply chain management – Apple manufactures AirPods Pro in China and Vietnam to

reduce cost while maintaining high quality standards, and then sells and delivers them

worldwide to customers

Describe an example of a horrible purchase experience and apply at least three of the 21

elements of the contemporary value chain model to recommend how value chain

improvement could have alleviated the bad situation.

I recently ordered 1 pint of Sesame-flavored Ice Cream using DoorDash on a Sunday

evening at 8 pm, with an expected arrival of 9 pm, in time for dessert for a group of friends

visiting. The order did not arrive until 10 pm and when it did, the ice-cream had melted to slush.

That was a horrible experience, and we ended up throwing most of it away.

Improving the following value chain elements could have improved the bad situation:

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 ● Customer need – The company could separate temperature-sensitive foods and treat them

with more care and urgency, knowing their taste and customer experience rapidly decline

over time.

● Supply chain management – The company could route orders of temperature-sensitive

foods more quickly, or only show customers locations that are within short-distances – to

reduce driving time and chances of cold food melting or hot food cooling.

● Product development – The company could create and provide special carrying cases to

drivers to retain the heat of hot foods and maintain the coldness of cold foods.

● Strategy – If such temperature-sensitive orders had really high return rates or poor

customer experience rates, the company could stop offering delivery on these products,

and instead promote customer pick-up.

Examine and apply the four dimensions of competitiveness to four different company

(brand) examples. Explain how each competitive strategy differentiates the company

(brand) from its competition.

The four dimensions of competitiveness are cost, quality, response time (or speed) and

flexibility (Presutti & Mawhinney, 2013).

● A cost competition strategy is when a company offers products and services at lower

prices than its competition to achieve competitive advantage. It aims to attract price-

sensitive customers and gain market share.

○ Walmart is an example of a company that uses a cost competitive strategy

(Walmart, n.d.). It promotes its everyday low prices and attracts price-sensitive

customers, compared to the competition. To keep prices low, Walmart lowers its

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 costs by leveraging economies of scale, running an efficient supply chain and

making bulk purchases from suppliers.

● A quality leadership strategy is when a company offers superior quality products and

services than its competitors.

○ Apple operates a quality leadership strategy (Apple, n.d.). It is known for making

high-quality, low-defect products, and incorporating features and user experiences

that wow customers. This has allowed the company to build a strong brand

reputation and a loyal customer base – which its competitors cannot easily

replicate.

● A speed to market strategy is when a company is the first to introduce new products and

services. This allows it to capture market share quickly and establish itself as an

innovator.

○ Alphabet leverages speed to market as a competitive strategy (Alphabet, n.d.). It

expedites its software development and launch cycles to introduce new products,

features and updates quickly. This speed to market allows the company to

maintain its strong position in multiple industries (e.g., Google Search, YouTube,

Google Maps).

● A flexibility strategy is when a company values responsiveness, and quickly adapts its

strategy, products and services to changing customer needs, market trends and

competition.

○ Netflix leverages flexibility as a competitive strategy (Netflix, n.d.). It initially

entered a very competitive market and disrupted players like Blockbuster, pivoted

from physical DVD rentals to online content streaming, and has since pivoted to

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 creating original content in addition to licensing and broadcasting content. It

continually adapts its content and corporate strategy in response to trends (e.g.,

password sharing) and viewer demands, which has kept it ahead of rising

competition.

Examine the concepts and interrelationships of (a) customer delight, (b) profitability, (c)

and effective value chain management upon the achievement of competitive advantage.

● Customer delight is when a company aims to exceed customer expectations and create a

positive emotional response through its products and services. This builds loyalty, repeat

business and a strong reputation, which can be a competitive advantage. This also leads

to higher profitability due to reduced customer acquisition and marketing costs, which

also leads to competitive advantage.

● Profitability is when a company is financially prudent and generates profits consistently.

This allows the company to reinvest in research and development, acquire other

companies, spend on marketing, invest in strategic projects, and attract and retain top

talent. The combination of this allows such companies to attract customers, retain them,

and generate even more profitability – which is a competitive advantage.

● Effective value chain management is when a company optimizes its activities of

designing, producing, marketing, delivering and providing support for its products and

services to create customer value while also controlling costs. This allows the company to

provide its products at less cost, with higher speed and quality, and leads to customer

delight and profitability, which leads to a competitive advantage.

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Identify two examples of companies that have been successful in this integration (customer

delight, profitability, with competitive advantage). For example, market share and run an

effective value chain.

● Apple achieves competitive advantage by integrating customer delight and an effective

value chain. Apple achieves customer delight by meticulously designing its products,

paying attention to detail, and offering a very intuitive user experience. Through vertical

integration, Apple operates an effective value chain as it controls many aspects of its

products’ design, manufacturing, assembly, distribution and support through vertical

integration. This allows the company to maintain consistency and quality, while reducing

delays and unnecessary costs. This in turn allows the company to provide competitive

pricing to its customers, while maintaining healthy margins and profitability.

● Amazon achieves competitive advantage by integrating profitability and an effective

value chain (Amazon, n.d.). Amazon generates profits through its Amazon Web Services

(AWS) division, which it reinvests into other strategic activities such as innovation,

expansion and customer delight. On the retail side, the company operates an effective

value chain by controlling the entire process of sourcing, manufacturing, warehousing

and distributing goods. This allows the company to reduce costs, maintain quality

standards, and in turn provide low pricing to customers, which gives it a competitive

advantage.

Identify two examples of companies that have not been successful in this integration.

Include explanations for your choices.

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 ● Blockbuster used to be the leader in the video rental industry in the US (Olito, 2023). It

provided a vast selection of movies and offered convenient retail locations to achieve

customer delight. However, it struggled to balance this with profitability. It was late in

entering the online streaming market and never established a significant position there.

This led to players like Netflix gaining market share, which resulted in declining profits

and the eventual closure of Blockbuster.

● BlackBerry used to be a leading smartphone manufacturer, and its secure email and

messaging and full keyboard led to customer delight (BlackBerry, n.d.). The company

achieved both customer delight and profitability for some time, maintaining its

competitive advantage. However, the company failed to evolve with changing consumer

preferences (e.g., larger screens, apps and games) and fell behind in the smartphone

trend. This led to reduced customer delight in comparison to its competitors, reduced

profitability and the erosion of its competitive advantage.

Make a compelling argument as to why an effective value chain creates competitive

advantage.

There are several arguments as to why an effective value chain creates competitive

advantage, shared below (Presutti & Mawhinney, 2013).

● An effective value chain allows a company to optimize processes, streamline operations,

and minimize waste – which results in lower costs. These lower costs then contribute to

higher margins and profitability (which the company can reinvest) or to an effective cost

leadership strategy, both of which are sources of competitive advantage.

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 ● An effective value chain enables a company to differentiate its products and services –

e.g., high quality or custom products. These elements in turn lead to customer

satisfaction, loyalty and competitive advantage.

● An effective value chain enables a company to be faster-to-market, which can be a huge

advantage in dynamic, fast paced industries like consumer technology. The effective

value chain allows a company to design, manufacture and deliver products quickly –

which allow it to capture market share and establish brand recognition before competitors

catch up.

● An effective value chain enables a company to deliver high-quality products and services,

which lead to customer delight and a competitive advantage. By controlling and

monitoring each step of the value chain, the company can ensure product quality,

reliability and performance. This in turn leads to customer delight, loyalty and a strong

brand reputation, which give it a competitive advantage.

Overall, an effective value chain can lead to lower costs, differentiated products, speed to

market and quality – which are all factors that lead to competitive advantage.

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 References

Alphabet. (n.d.). Investor Relations. https://abc.xyz/investor/

Amazon. (n.d.). About Us. https://www.aboutamazon.com/about-us

Apple. (n.d.). Shared Values. https://www.apple.com/careers/ca/shared-values.html

BlackBerry. (n.d.). Company Overview.

https://www.blackberry.com/us/en/company/overview

Netflix. (n.d.). Long-term view.

https://ir.netflix.net/ir-overview/long-term-view/default.aspx

Olito, F. (2023, April 24). Blockbuster: The rise and fall of the movie rental store, and

what happened to the Brand. https://www.businessinsider.com/rise-and-fall-of-

blockbuster

Presutti, W. D., & Mawhinney, J. R. (2013). Chapter 2: The Value Chain’s Impact on

Competitiveness and Profitability. In Understanding the Dynamics of the Value

Chain (1st ed.). Business Expert Press.

Walmart. (n.d.). Investor Relations. https://stock.walmart.com/home/default.aspx