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Steps in Value Chain Analysis Value chain analysis can be broken down into a three sequential steps: Break down a market/organization into its key activities under each of the major headings in the model; Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage; Determine strategies built around focusing on activities where competitive advantage can be sustained Further analysis of value chain The firms margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation. 6.2 Value network The value network is the set of inter- organizational links and relationships that are necessary to create product or service. An organization needs to be clear about what activities it ought to undertake itself and which it should not and , perhaps, should outsource. Supplier value chain Channel value chain Customer value chain Organizations value chain Managers should understand the bases of their organizations strategic capabilities in relation to the wider value network. Four key issues are: (1) Which activities are centrally important to an organizations strategic capability and
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