Sector Matrix vs. Value Chain and Commodity Chain
Using an extended example critically discuss the view that a ‘sector matrix’ gives a better strategic understanding of product markets than the concepts of ‘product’ or ‘commodity’ chains.
Abstract
This paper will investigate the relevance of three tools for analysing and prescribing remedies for improving company performance; Porter’s Value Chain, Gereffi and Korzeniewicz’s Global Commodities Chain framework and finally the Sector Matrix approach as described by Froud, et. al. Values and limitations of these approaches will be recognised and discussed via specific references to Ford Motor Company (hereafter to be referred to as Ford), the third largest corporation in the automotive industry.
The Value Chain
“Every firm is a collection of activities that are performed to design, produce, market, deliver and support its product. All these activities can be described using a value chain…”
(Porter, 1985: pp. 36)
Porter (1985) argues that firms achieve competitive advantage via implementation of successful generic strategy (i.e. differentiation, cost leadership, focus) in the chain of a particular firm’s business unit activities. Porter classifies these as either primary (inbound logistics, operations, outbound logistics, marketing & sales, and service) or support activities (procurement, technology development, human resource management, and firm infrastructure). Porter defines primary activities as those ‘involved in the physical creation of the product and its sale and transfer to the buyer as well as after-sale assistance’ and support activities as those which ‘support the primary activities and each other by providing inputs, technology, human resources, and various firmwide functions’. Moreover, he argues that three support activities; human resource management, technology development and procurement ‘can be associated with specific primary activities as well as support the entire chain’ whereas the fourth support activity, firm
Abstract
This paper will investigate the relevance of three tools for analysing and prescribing remedies for improving company performance; Porter’s Value Chain, Gereffi and Korzeniewicz’s Global Commodities Chain framework and finally the Sector Matrix approach as described by Froud, et. al. Values and limitations of these approaches will be recognised and discussed via specific references to Ford Motor Company (hereafter to be referred to as Ford), the third largest corporation in the automotive industry.
The Value Chain
“Every firm is a collection of activities that are performed to design, produce, market, deliver and support its product. All these activities can be described using a value chain…”
(Porter, 1985: pp. 36)
Porter (1985) argues that firms achieve competitive advantage via implementation of successful generic strategy (i.e. differentiation, cost leadership, focus) in the chain of a particular firm’s business unit activities. Porter classifies these as either primary (inbound logistics, operations, outbound logistics, marketing & sales, and service) or support activities (procurement, technology development, human resource management, and firm infrastructure). Porter defines primary activities as those ‘involved in the physical creation of the product and its sale and transfer to the buyer as well as after-sale assistance’ and support activities as those which ‘support the primary activities and each other by providing inputs, technology, human resources, and various firmwide functions’. Moreover, he argues that three support activities; human resource management, technology development and procurement ‘can be associated with specific primary activities as well as support the entire chain’ whereas the fourth support activity, firm
References: BBC News (2005) ‘Bridgestone “leads Kwik-Fit Race” ’ (BBC News) Available at: http://news.bbc.co.uk/2/hi/business/4605987.stm (Accessed 2008, March 10) BBC News (2005) ‘Kwik-Fit to be sold in £800m deal’ (BBC News) Available at: http://news.bbc.co.uk/2/hi/business/4620895.stm (Accessed 2008 Birch, K. (2006) ‘Global Commodity Chains in the UK Biotechnology Industry: An Alliance-Driven Governance Model’ Centre for Public Policy for Regions Cutler, T Froud, J. et. al. (2006) ‘Financialization and Strategy,’ Abingdon: Routledge Gereffi, G Gereffi, G. (1999) ‘A Commodity Chains Framework for Analyzing Global Industries’ Haldex Traction Systems- About us Hopkins, T. et. al. (1986) ‘Commodity Chains in the World-Economy Prior to 1800’ Review 10, Vol. 1: pp. 157-170. International Management Information Systems Seminar at IDEC Hiroshima University (2005) Lecture given by: Sukhdev Johal, RHUL (2008) Lecture given by: Dr. Catherine Wang, RHUL (2007) Media.Ford.Com (2006) ‘Ford Fights Back’ Available at: http://media.ford.com/article_display.cfm?article_id=22382 (Accessed 2008, March 12) MotorTrader (2005) ‘Ford sells Hertz car rental unit’ Nasser, J. (1999) ‘Letter to Shareholders and Consumers from Ford President, CEO’ (Ford Motor Company) Available at: http://media.ford.com/newsroom/release_display.cfm?release=1282 (Accessed: 2008, March 10) Porter, M. (1985) ‘Competitive Advantage,’ New York: Free Press Society of Motor Manufacturers and Traders Stabell, C & Fjeldstad, O.D. (1998) ‘Configuring Value for Competitive Advantage: On Chains, Shops and Networks,’ Strategic Management Journal. Vol 19; pp. 413-437 Visteon (2008) ‘Spin-off Information’