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VaIue Chain AnaIysis

What can it do for you


and your company?
Copyright aney & associates Inc. November 2002

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TabIe of Contents
VaIue Chain AnaIysis
Competitive InteIIigence - what is it?
VaIue of Competitive InteIIigence
Different tooIs and techniques of Competitive InteIIigence
VaIue Chain AnaIysis
VaIue Chain Components
DeveIoping your vaIue chain
How a firm can use vaIue chain anaIysis

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

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VaIue Chain AnaIysis
Jalue 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

Ianey & associates Inc


VaIue Chain AnaIysis
Jalue 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
Reduce your costs

Ianey & associates Inc


VaIue Chain AnaIysis
Jalue 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
Reduce your costs
Improve your market share

Ianey & associates Inc


VaIue Chain AnaIysis
Jalue 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
Reduce your costs
Improve your market share
Bottom Line - improve
overall profitability!

Ianey & associates Inc


Competitive InteIIigence - what is it?
"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

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Competitive InteIIigence - what is it?
Competitive Intelligence is:
Information about opportunities and
threats

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Competitive InteIIigence - what is it?
Competitive Intelligence is:
InIormation about opportunities and threats
Leveraging information/knowledge to
improve competitive position of
companies and local industries

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Competitive InteIIigence - what is it?
Competitive Intelligence is:
InIormation about opportunities and threats
Leveraging inIormation/knowledge to improve
competitive position oI companies and local industries
Forecasting of changes about the
economic environment

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Competitive InteIIigence - what is it?
Competitive Intelligence is:
InIormation about opportunities and threats
InIormation which makes companies and local
industries more competitive
Forecasting oI changes about the economic
environment
Actionable recommendations from
analysis of the environment

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Competitive InteIIigence - what is it?
It is the total knowledge a
company or a local industry
possesses about the environment in
which it competes
gathered in an ethical manner

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Market InteIIigence vs
Competitive InteIIigence
Market Intelligence:
Tells a company about the
marketplace

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Market InteIIigence vs
Competitive InteIIigence
Market Intelligence:
%ells a company about its environment
Supply and demand for its
products

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Market InteIIigence vs
Competitive InteIIigence
Market Intelligence:
%ells a company about its environment
Supply and demand Ior its products
Drivers that influence demand

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Market InteIIigence vs
Competitive InteIIigence
Market Intelligence:
%ells a company about its environment
Supply and demand Ior its products
Drivers that inIluence demand
ho the buyers and suppliers are

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Market InteIIigence vs
Competitive InteIIigence
Market Intelligence:
%ells a company about its environment
Supply and demand Ior its products
Drivers that inIluence demand
Who the buyers and suppliers are
Overall economic outlook for the
product

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Market InteIIigence vs
Competitive InteIIigence
arket Intelligence:
%ells a company about its environment
Supply and demand Ior its products
Drivers that inIluence demand
Who the buyers and suppliers are
Overall economic outlook Ior the product
Competitive Intelligence:
Helps a company understand what its
competitive position is in a specific
market - weaknesses and strengths

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Business Pyramid
Business Intelligence
road environmental
scanning, market research
and analysis

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Business Pyramid
usiness Intelligence
Competitive
Intelligence
Assimilates all
Competitive Intelligence
road environmental
scanning, market research
and analysis

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Business Pyramid
usiness Intelligence
Competitor
Analysis
Competitive
Intelligence
Individual Competitor
ProIile
Assimilates all
Competitive Intelligence
road environmental
scanning, market research
and analysis

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VaIue of Competitive InteIIigence
A study by the University oI North %exas Iound that CI
Companies outperIormed other companies by all three
key Iinancial measures
1
Sales
arket share
Earnings per share
1
Steven iller, Editor Competitive Intelligence agazine 1995 study

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Different tooIs and techniques
Five basic tools :
Strategic Analysis

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Different tooIs and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis

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Different tooIs and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis
Behavioural Analysis

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Different tooIs and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis
ehavioral Analysis
Financial Analysis

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Different tooIs and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis
ehavioral Analysis
Financial Analysis
Customer Oriented Analysis

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Different tooIs and techniques
Five basic tools :
Strategic Analysis
Product-oriented Analysis
ehavioral Analysis
Financial Analysis
Customer Oriented Analysis
Value Chain Analysis

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VaIue Chain AnaIysis
It can be developed for individual
competitors or an entire industry

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VaIue Chain AnaIysis
It can be developed Ior individual competitors or an entire
industry
It can be for the product as it relates to
end customers or customers within a
chain

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VaIue Chain AnaIysis
Cost Factors
Why costs differ?
Why swings in profitability?
Efficiencies and inefficiencies
Influence
Competitor`s costs
Nature and source of advantage

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The Three Tiers
There are three tiers of Value Chain Analysis

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The Three Tiers
%here are three tiers oI Value Chain Analysis
Internal Cost Analysis

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The Three Tiers
%here are three tiers oI Value Chain Analysis
Internal Cost Analysis
A firm or a sector needs to understand
its own value chain in order to compare
to its competitors

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The Three Tiers
%here are three tiers oI Value Chain Analysis
Internal Cost Analysis
Internal Differentiation Analysis

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The Three Tiers
%here are three tiers oI Value Chain Analysis
Internal Cost Analysis
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

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The Three Tiers
%here are three tiers oI Value Chain Analysis
Internal Cost Analysis
Internal DiIIerentiation Analysis
Vertical Linkage Analysis

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VerticaI Linkage AnaIysis
gaining and sustaining a cometitive advantage
requires that a Iirm understand the entire vaIue
deIivery system, not just the ortion oI the vaIue
chain in vhich it articiates. SuIiers and
customers and suIiers` suIiers and
customers` customers have roIit margins that are
imortant to identiIy in understanding a Iirm`s
cost/diIIerentiation ositioning, lecause the end
use customers uItimateIy ay Ior aII the roIit
margins aIong the entire vaIue chain.
ShanI and Govindarajan (I993)

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VaIue Chain Components
R&D
Design
Production
Marketing
Distribution
Service
Supplier
Value
Chain
Firm Z
Value
Chain
Distribution
Value
Chain
Buyer
Value
Chain
Disposal
Value
Chain
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Primary
Activities
Support
Activities
Service
Service
Service
Service
Value Chain Analysis lor Assessing Competitive AJvantage CMA HanJlook

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DeveIoping VaIue Chains
Value Chain Analysis requires expertise in
more than one area

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DeveIoping VaIue Chains
Value Chain Analysis requires expertise in more than one
area
Competitive intelligence is to be gathered
ethically

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DeveIoping VaIue 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.

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How a firm can use VaIue Chain AnaIysis
Three useful strategic frameworks have been
identified for value chain analysis:

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How a firm can use VaIue Chain AnaIysis
Three useful strategic frameworks have been
identified for value chain analysis:
Industry Structure Analysis

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How a firm can use VaIue Chain AnaIysis
Three useful strategic frameworks have been
identified for value chain analysis:
Industry Structure Analysis
Core Competencies

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How a firm can use VaIue Chain AnaIysis
Three useful strategic frameworks have been
identified for value chain analysis:\
Industry Structure Analysis
Core Competencies
Segmentation Analysis

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MichaeI Porter's Five Forces ModeI
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

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Bargaining Power of SuppIiers/Buyers
For Suppliers this includes:
Input differentiation
Supplier concentration
Volume
Cost relative to total dollars

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Bargaining Power of SuppIiers/Buyers
For Buyers this includes:
Buyer concentration
Volume
Integration

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Entry Barriers
Economies of scale
Product Differences
Brand Identity
Access to distribution
Cost advantages
Government policy

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

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ReaI Life ExampIes
SWATCH
IKEA
FedEx
AB originated Beef to L.A. retail stores
Agricultural chemicals sold in the US Midwest

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BibIiography
CMA Value Chain Analysis for Assessing Competitive
Advantage
Canadian Institute for Competitive Intelligence
SCIP - Society of Competitive Intelligence Professionals
email address scipedmtelus.net
Competitive Intelligence Magazine