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By Charles Green
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For your small business to have a competitive edge, certain fundamentals must be in place to succeed. Those fundamentals comprise the value chain analysis, a concept developed and advanced by Michael Porter in his book “Competitive Advantage: Creating and Sustaining Superior Performance.” Successful value chain management should be part of your small business strategic planning initiative, a powerful way to help your operation contain costs and succeed in today’s ultra-competitive business environment.
Research and Development
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The first step in value chain management is researching the products your customers want. Through careful market analysis, including the measurement of consumer trends, companies can anticipate what people want and have those products available. On the small business level, this could mean working directly with suppliers to produce a new product.
Product Design
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Once a new product has been identified or an existing product upgraded to meet anticipated demand, that item is tested, refined and sent on for production. In companies where service is the product, the same planning process is used.
Production Process
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Where your product is manufactured can have a significant impact on quality, cost and value. Writing for Business Process Trends, Andrew Feller, Dr. Dan Shunk and Dr. Tom Callarman note that “...global sourcing and supply has begun a long-term process of leveling the playing field for adding value world wide.” More than likely your small business will look overseas to suppliers who can build what your company needs at a competitive price.
Marketing and Sales
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Feller, Shrunk and Callarman noted three components every successful product must offer: product value, service value and a “wow” value. That latter component goes beyond personal care and warranty service to provide an enhanced level of service not generally offered. One current example of a company putting “wow” into practice is the Ritz-Carlton Hotels, whose managers have been empowered to “...to permit every employee to spend up to $2,000 making any single guest satisfied,” according to the Oct. 30, 2009, issue of "Forbes" magazine.
Distribution Management
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Where you warehouse and how you distribute your product is a critical link in the value chain. Transportation, material handling, packaging, communications and information systems need to be in place to get the product to your customers. Distribution, or logistics management, remains important in the digital age, as physical locations such as stores and warehouses are still needed. How you employ each distribution point is subject to review and change.
Customer Service
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Getting the product to your customers means training your employees to know everything about it, advising customers how to use the product, diagnosing and troubleshooting, and providing friendly service. This final link in the supply chain is refined as needed and is used by senior management to gauge customer behavior.
References
- Competitive Advantage: Creating and Sustaining Superior Performance; Michael Porter, 1985
- Forbes: How Ritz-Carlton Stays At The Top
Writer Bio
Charles Green is a freelance writer in North Carolina who has been writing since 1992 and freelancing since 2002. His work appears in "435 South Magazine," "Wisconsin Golfer" and for various websites. Green earned a Bacheler of Science in business administration from Ramapo College of New Jersey.
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