The notion of the ‘value chain’ was first created by Michael Porter. The concept of having a value chain in any business is for it to develop a sustainable competitive advantage in the industry that it operates in. All organizations entail various activities that link together to create the value of the company, and together these activities form the organisation’s value chain. The Value chain of any industry always begins with the production of raw materials and ends when the final product is delivered to the consumer. The primary aim of the value chain framework is maximize value creation while minimizing the costs involved.
The value chain analysis essentially entails the linkage of two areas. Firstly, the value chain links the value of the organisation’s activities with its main functional parts. Then the contribution of each of the part to the overall added value of the business is assessed. To conduct a value chain analysis, the organisation’s activities are divided into primary and supporting activities. Primary activities are related directly with production, whereas, the supporting activities such as human resource management provide the background essential for the effectiveness and efficiency of the firm.
Analysis of Modern Retail Chain –The TESCO Case
Though the modern retail value chain hasn’t changed much since 1920s, the concentration in retailing space has been a key development. Also, on the supply side, new firms have entered and successfully established themselves in product manufacturing firms. This further resulted in the loss of ability to capture Potential Industry Earnings by demanding a payment in excess of its cost. In mass market retailing the trend in market share show that TESCO has consistently outperformed its competitors and has maintained its number 1 position in UK market. At this juncture, it is intriguing as to Why TESCO has been successful in creating value for customers and capturing...
References: Lynch, R. (2003), Corporate Strategy, 3rd ed., Prentice Hall Financial Times.
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