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Markecting - Essay Example

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Value chain analysis is the process whereby companies identify the cost advantages and disadvantages that they have by breaking down their organizational activities and assigning them costs. This report aims to uncover the effects of this management model on an advertising…
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Download file to see previous pages... hael Porter the Bishop William Lawrence University Professor at Harvard Business School has commented that any business and its standing at any point in time can best be evaluated through making it go through a value chain analysis. Best value can be defined as the difference between total revenues and total costs. The company that can maximize this difference is adding value. This difference can be enhanced in a better manner when the firm is aware of where its costs are high and where they are low (Schmitz, 2005). Thus, this model basically entails the breaking down of organizational activities into various small units and then assigning costs to each unit so as to determine the amount that it is costing the company. This calculation of costs is important because a company can then see where it can curtail costs and where a slight cost relaxation would not harm the value chain.
Value chain activities take place in almost every organization. From buying the raw materials to the product design, from the product development stages to the distribution of the product, such activities are easy to identify. They have to be broken down into the smallest units possible, so that identification of those activities where cost curtailment would help can be carried out. From industry to industry, the activities will differ slightly (Miguel, 1996). For example, the hotel industry will have sub-activities within customer service such as room service and telephone services, whereas the advertising industry, which is the subject of discussion of this report, will have activities such as conducting research and creating advertising briefs.
Through such a process of analysis, VCA helps companies in assessing their own strengths and weaknesses and then comparing them to the VCA of their competitors, as well as their own VCA trends seen over time. This comparison helps companies to decide upon their core competence and distinctive competence and to capitalize on those strengths, ...Download file to see next pagesRead More
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