Value chain analysis
Strategic Value Chain Analysis
Wednesday, December 04, 2013
8:48 AM
"Competitive Advantage" 1986 Companies are not groups of people, they are sets of activities. There are 2 sets of activities: Cost and willingness to pay (WTP) PRIMARY:
In-bound / raw material ==> Process ==> Marketing ==> Service
SECONDARY:
Accounting, Exec Management, CIA Cost of distribution drivers (for cinnamon buns):
# of stops (greater # raises cost)
# of packages they drop per stop (greater # lowers cost)
Betsy baking used a lot more preservatives in their buns - because they didn't care as much about quality - so longer shelf life means fewer runs, lower distribution costs ----------------------- PC Industry (1996) Buyers - High & Growing
Increasing choice, lowering prices, price sensitive - compatibility (ability to switch); increasing repeat buyers who will be more educated; Resellers had access and knowledge to the customer, which gave them some bargaining power
Possibility of vertical integration backward of suppliers (i.e., distributors producing their own computers) Suppliers - Mod/High
Processors High, Components Low, Software High (Lots of component manufacturers, but very few processor providers, and pretty much just one operating system company) Rivalry - High
Commoditization (price-sensitive buyers)
Frequent upgrades creating excess capacity of older machines
There was no true need to upgrade the processors every 18 months - this strategy was intended simply to create excess capacity, forcing manufacturers to discount deeply the older machines, cutting into the profitability of the industry
Allocation by loyalty - leveling the playing field
Intel rationed processors to PC manufacturers in proportion to how many chips they bought from Intel in the past; so they rewarded loyalty
Whether you were a pipsqueak from NJ or IBM, your loyalty mattered, and you'll get it for the same price from Intel, the only thing that
Wednesday, December 04, 2013
8:48 AM
"Competitive Advantage" 1986 Companies are not groups of people, they are sets of activities. There are 2 sets of activities: Cost and willingness to pay (WTP) PRIMARY:
In-bound / raw material ==> Process ==> Marketing ==> Service
SECONDARY:
Accounting, Exec Management, CIA Cost of distribution drivers (for cinnamon buns):
# of stops (greater # raises cost)
# of packages they drop per stop (greater # lowers cost)
Betsy baking used a lot more preservatives in their buns - because they didn't care as much about quality - so longer shelf life means fewer runs, lower distribution costs ----------------------- PC Industry (1996) Buyers - High & Growing
Increasing choice, lowering prices, price sensitive - compatibility (ability to switch); increasing repeat buyers who will be more educated; Resellers had access and knowledge to the customer, which gave them some bargaining power
Possibility of vertical integration backward of suppliers (i.e., distributors producing their own computers) Suppliers - Mod/High
Processors High, Components Low, Software High (Lots of component manufacturers, but very few processor providers, and pretty much just one operating system company) Rivalry - High
Commoditization (price-sensitive buyers)
Frequent upgrades creating excess capacity of older machines
There was no true need to upgrade the processors every 18 months - this strategy was intended simply to create excess capacity, forcing manufacturers to discount deeply the older machines, cutting into the profitability of the industry
Allocation by loyalty - leveling the playing field
Intel rationed processors to PC manufacturers in proportion to how many chips they bought from Intel in the past; so they rewarded loyalty
Whether you were a pipsqueak from NJ or IBM, your loyalty mattered, and you'll get it for the same price from Intel, the only thing that