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Assignment Bpsa 3

Industry analysis examines economic, political, and market factors that influence an industry's development. It considers the power of suppliers and buyers as well as competitors and potential new entrants. Value chain analysis describes the activities within an organization and how they add value. It separates a firm's system into primary activities like operations, logistics, marketing, and support activities like procurement. Performing a value chain analysis identifies cost advantages over competitors and how a product can add value to customers' operations. Technology impacts competitive advantage by changing activities or configurations to control cost drivers like economies of scale.

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89 views4 pages

Assignment Bpsa 3

Industry analysis examines economic, political, and market factors that influence an industry's development. It considers the power of suppliers and buyers as well as competitors and potential new entrants. Value chain analysis describes the activities within an organization and how they add value. It separates a firm's system into primary activities like operations, logistics, marketing, and support activities like procurement. Performing a value chain analysis identifies cost advantages over competitors and how a product can add value to customers' operations. Technology impacts competitive advantage by changing activities or configurations to control cost drivers like economies of scale.

Uploaded by

Tonmoy Borah
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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[BPSA] ASSIGNMENT

INDUSTRY ANALYSIS

I ndustry Analysis is a market assessment tool designed to provide a business with an


idea of the complexity of a particular industry. Industry analysis involves reviewing the
economic, political and market factors that influence the way the industry develops.
Major factors can include the power wielded by suppliers and buyers, the condition of
competitors, and the likelihood of new market entrants.

The Value Chain

To better understand the activities through which a firm develops a competitive


advantage and creates shareholder value, it is useful to separate the business system
into a series of value-generating activities referred to as the value chain. The value
chain approach was developed by Michael Porter in the 1980s in his book “Competitive
Advantage: Creating and Sustaining Superior Performance”.

Value chain analysis describes the activities within and around an organization, and
relates them to an analysis of the competitive strength of the organization. Therefore, it
evaluates which value each particular activity adds to the organizations products or
services. This idea was built upon the insight that an organization is more than a
random compilation of machinery, equipment, people and money. Only if these things
are arranged into systems and systematic activates it will become possible to produce
something for which customers are willing to pay a price. Porter argues that the ability to
perform particular activities and to manage the linkages between these activities is a
source of competitive advantage. 

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[BPSA] ASSIGNMENT

Porter distinguishes between primary activities and support activities. Primary activities
are directly concerned with the creation or delivery of a product or service. They can be
grouped into five main areas: inbound logistics, operations, outbound logistics,
marketing and sales, and service. Each of these primary activities is linked to support
activities which help to improve their effectiveness or efficiency. There are four main
areas of support activities: procurement, technology development (including R&D),
human resource management, and infrastructure (systems for planning, finance, quality,
information management etc.). 

The basic model of Porters Value Chain is as follows:

A typical value chain analysis can be performed in the following steps:

·       Analysis of own value chain – which costs are related to every single activity

·       Analysis of customers value chains – how does our product fit into their value chain

·       Identification of potential cost advantages in comparison with competitors

·       Identification of potential value added for the customer – how can our product  add value to the
customers value chain (e.g. lower costs or higher performance) – where does the customer see such
potential

Cost Advantage and the Value Chain

A firm may create a cost advantage either by reducing the cost of individual value chain
activities or by reconfiguring the value chain.

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[BPSA] ASSIGNMENT

Once the value chain is defined, a cost analysis can be performed by assigning costs to
the value chain activities. The costs obtained from the accounting report may need to be
modified in order to allocate them properly to the value creating activities.

Porter identified 10 cost drivers related to value chain activities:

 Economies of scale
 Learning
 Capacity utilization
 Linkages among activities
 Interrelationships among business units
 Degree of vertical integration
 Timing of market entry
 Firm's policy of cost or differentiation
 Geographic location
 Institutional factors (regulation, union activity, taxes, etc.)

A firm develops a cost advantage by controlling these drivers better than do the
competitors.

Technology and the Value Chain

Because technology is employed to some degree in every value creating activity,


changes in technology can impact competitive advantage by incrementally changing the
activities themselves or by making possible new configurations of the value chain.

Various technologies are used in both primary value activities and support activities:

 Inbound Logistics Technologies


o Transportation
o Material handling
o Material storage
o Communications
o Testing
o Information systems

 Operations Technologies
o Process
o Materials
o Machine tools
o Material handling
o Packaging
o Maintenance
o Testing

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[BPSA] ASSIGNMENT

o Building design & operation


o Information systems

 Outbound Logistics Technologies


o Transportation
o Material handling
o Packaging
o Communications
o Information systems

 Marketing & Sales Technologies


o Media
o Audio/video
o Communications
o Information systems

 Service Technologies
o Testing
o Communications
o Information systems

The value chain framework has been used as a powerful analysis tool for organisational
strategic planning for nearly two decades now. The value chain framework shows that
the value chain of a company may be useful in identifying and understanding crucial
aspects to achieve competitive strengths and core competencies in the marketplace.
The model also reveals how the value chain activities are tied together to ultimately
create value for the consumer

The nature of value chain activities differs greatly in accordance with the types of
companies and industries.

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