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Value Chain Analysis

Value Chain Analysis refers essentially to the differentiation between a given commercial organization in comparison to its competitors. The differentiation should be within product or service proficiency, quality, or price advantage.

Product proficiency and comparably superior quality refer to the conceptual or perceived greater value compared to the competitors’ product line. Similarly, price advantage refers to conceptual or perceived lower costs in comparison to competitors. Nevertheless, non of the theoretical advantages have to be real or tangible because perception plays a great role.

Moreover, those activities that lead to value creation and maintenance are designed to achieve a competitive edge geared toward greater profitability and quantitatively greater market shares. However, those activities may or may not be limited to internal organizational efforts rather than a combination of internal and external components, which may or may not be classically managed or organized.

To conduct proper value chain analysis, the comparisons of the given values have to be in sync and identical, i.e., the comparison of value has to be conducted invariably on products and services that are virtually similar. Such an approach that eliminates potential data collection and analysis flaws may contribute to greater accuracy in the overall outcome and potentially less complicated yet more effective implementation.

Nevertheless, it is important to point out that though the theoretical aspects of value chain management and analysis make for a great hypothetical learning experience, the real-world implementation is not as flawless; factors such as lack of identical products and services for comparison purposes, lack of price comparison because of fluctuation in local economy and currency, cash flow and budgeting, diversion from traditional return on investment approach as well as local and internal conflicts contribute to a more problematic process.

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