Lecture Four: Outline

1
Lecture Four Outline

• Introduction
• Value Creation
• Value Migration
• Customer Value
• Customer Value Influences and Delivered Value
• Consumer Costs
• Delivering Desired Outcomes Efficiently The
  Creative Key to Competitive Advantage
• Generic Value Chain Processes
• Competitive Advantage Based on Technology,
  Relationship and Knowledge Management

2
Introduction

• Porter (1996,) cited in Walters (2002) suggests
  that while delivering greater value allows a
  company to charge higher average unit prices
  greater efficiency results in lower average
  costs.

3
Introduction (contd)

• The areas of concern during this stage are to
  understand customer perceptions and expectations,
  ensure that the products produced meet these
  requirements and ensure that the value
  proposition is delivered.

4
Introduction (contd)

• Kotler (2002) colloquially refers to this process
  as

5
Introduction (contd)

• Identify the value.

6
Introduction (contd)

• Deliver the value.

7
Introduction (contd)

• Communicate the value.

8
Introduction (contd)

• Walters (2002) claims that successful value
  delivery is based upon an understanding of
  stakeholder interests and their management as
  well as the effective management of operations
  (defined as production, logistics and service).

9
Value Creation

• Walters (2002) suggests that the organisations
  value chain become merged with those of other
  value chain members. An important feature is the
  role of information management that provides a
  coordinating activity

10
Value Creation (contd)

• The value chain has an expanded role. It becomes
  an integral component in the strategy process
  the evaluation of the companys core competence
  and its fit in the overall creation of value.

11
Value Creation (contd)

• The questions to be asked are

12
Value Creation (contd)

• What is the combination of value drivers required
  by the target customer group?

13
Value Creation (contd)

• What are the implications of different decisions?

14
Value Creation (contd)

• What are the implications for costs do economies
  of scale or scope exist?

15
Value Creation (contd)

• Are there opportunities for trade-offs to occur
  between the value creation system partners?

16
Value Migration

• Walters (2002) suggests value migration occurs as
  both economic and shareholder value flows away
  from obsolescent (and obsolete) business models

17
Value Migration (contd)

• Slywotzky (1996) cited in Walters (2002) argue
  that new models offer the same benefits to
  customers but at lower cost by changing the model
  structure.

18
Customer Value

• Shenkman (1992) shows us that the concept of
  value is central to strategic thinking. It is
  highly subjective as to what the term means.

19
Customer Value (contd)

• Shenkman (1992) illustrates the vagaries of the
  concept of value. Does it mean we get a good
  price, or a bargain, on a particular item? Is it
  a term that applies to anything that has a price?
  Does a price designate a specific value for
  something? If so, what does this value relate to
  the products usefulness, its durability, or
  the brand nameplate it bears? Or is value
  something that is completely subjective,
  something that is only determined individually by
  the one assigning the value to things based on
  personal requirements, demands or pleasure?

20
Customer Value Influences and Delivered Value
21
Consumer Costs
Source Walters (2002)
22
Delivering Desired Outcomes Efficiently The
Creative Key to Competitive Advantage

• Chatteejee (1998) shows that competitive
  advantage comes from unique resources that cannot
  be easily acquired, imitated or substituted by
  others.

23
Delivering Desired Outcomes Efficiently The
Creative Key to Competitive Advantage (contd)

• When the manger is planning, he or she needs to
  ask questions such as

24
Delivering Desired Outcomes Efficiently The
Creative Key to Competitive Advantage (contd)

• What is the basis for the value that comes from
  the resource?

25
Delivering Desired Outcomes Efficiently The
Creative Key to Competitive Advantage (contd)

• Is this basis likely to continue in the future?

26
Delivering Desired Outcomes Efficiently The
Creative Key to Competitive Advantage (contd)

• If the basis remains unchanged in the future, how
  does one know if the resource is inimitable or
  unsubstitutable?

27
Generic Value Chain Processes
Source Walters (2002)
28
Competitive Advantage Based on Technology,
Relationship and Knowledge Management
29
Discussion Questions

• Outline the steps that you would take in
  designing the most effective interorganisational
  structure within a value chain to maximise
  efficiency and effectiveness. Apply these basic
  principles to an example.
• What would you classify as effective value
  delivery? How can this be achieved?

30
Discussion Questions (contd)

• How can competitive advantage be generated
  through interorganisational structures within a
  value chain?