Competitive Advantage and the Value Chain

Competitive Advantage and the Value Chain

Competitiveness and profitability are two of the most important factors to the success of a
business. When a business is trying to be competitive, before you would think about how they
compare to other businesses. However, in today’s market, competition is defined more as value
chain versus value chain than company versus company (Presutti Jr & Mawhinney, 2013). The
type of value chain a business implements is a major key in their competitive success. There are
four core dimensions in which a company may choose to compete in: cost, quality, response
time, and flexibility (Presutti Jr & Mawhinney, 2013). Companies can choose to focus on one or
more of the core dimensions.
In order for a company to be successful in one of the core dimensions, they must design
their components of the value chain to match what they are trying to develop. Another aspect
that contributes to the company’s competitive success is linking value chain performance to the
business performance. The way this can be measured is by linking the metrics of the
components of the value chain, the supply can, and the corporate financials (Presutti Jr &
Mawhinney, 2013). There is no question that a company’s competitive success is clearly linked
to their value chain. This paper will discuss the different correlations that contribute to a
company’s competitive advantage and provide examples of companies who have been successful
and unsuccessful in this process.


Correlation Review: Competitive Advantage
Competitive advantage can ultimately decide the fate of a business. Many researchers
believe that “competitive advantage is the assessment of the company’s capabilities and market
position with regard to the advantage it achieves in relation to competitors” (Mukerjee, 2016).
Although there is a significant amount of research available on competitive advantage, a
company needs to understand the different elements and how they contribute to their success.
The following elements lead organizations to creating a competitive advantage: effective value
chain management, customer delight, and profitability. These elements are all interrelated and
together create a competitive advantage for organizations. The elements will be discussed further
to identify how they interconnect to form a competitive advantage.
Effective Value Chain Management
One of the most crucial factors in an effective value chain management is leadership.
Leadership is responsible for creating a culture of collaboration in which effective value chain
management depends on (Presutti Jr & Mawhinney, 2013). All companies will experience some
problems within the marketplace but in order to lessen the number of problems, leadership must
properly execute designated strategies. The value chain is fundamental to effective execution. It
is the responsibility of leadership to be able to properly understand the company’s value chain
and how it creates value for the customers. How effectively leadership is able to manage the
value chain ties closely to the company’s competitive advantage.
Customer Delight
Customer delight is considered more than a customer being satisfied and exceeding their
expectations. If a customer’s satisfaction is exceeded from the level of contentment it can be
called delight if the fulfillment level is higher than the expectations (Marquardt, 2015). In order
for a company to be able to use customer delight towards a competitive advantage, there must be
a positive emotional state and surprise degree following after exceeding the customer’s
expectations. There are three main elements that contribute to customer delight: service quality,
product quality, and price.

In order for a company to fulfill a customer’s service quality expectation, they must be
reliable, responsive, have assurance, empathy, and tangibles. Of the five factors, reliability is the
most important to a customer. A company must perform accurately to what is promised. If this
is not accomplished, customer delight will never occur. A company’s response time is an
important factor when it comes to a specific request, question, or complaint. A customer focuses
on both the answer and response time. Assurance is the courtesy and knowledge of employees
and their ability to gain trust and confidence (Marquardt, 2015). A major factor that
differentiates customer satisfaction to customer delight is how a company can build a personal
relationship with the customer. Empathy is a key factor is building these personal relationships
but understanding and acknowledge individual preferences. Tangibles would apply to physical
proofs of service which can include the appearance of a facility, equipment, and personnel and
communication materials. If a customer feels all these elements are met, it can result in customer
delight which ultimately turns into customer loyalty. The more loyal customers a company can
establish, the more they can earn, improve, and maintain their competitive advantage within the
market.
Profitability
The Contemporary Value Chain model is designed to capture important elements of a
company’s value chain that is not address in Porter’s Value Chain model (Presutti Jr &
Mawhinney, 2013). A company cannot be competitive or successful without being profitable.
The Contemporary Value Chain model considers profitability a crucial aspect to a company’s
competitive advantage because it permeates and enables the value chain and has a direct impact.
The more a company is profitable, the more value they establish with their product or service. In
addition, profitability is a way to measure financial success within the market.

Competitive Advantage
Establishing a competitive advantage requires an effective value chain management,
customer delight, and profitability. All three elements are linked together and a direct correlation
from the company’s value chain. Being competitive can be a risk but the more they are able to
be success in the integration process, the more long-term success they can establish. In order for
long-term success to occur, a company has to remain competitive year after year. Each of the
three elements are crucial factors and must occur in order to gain a competitive advantage within
the market.
Examples
Successful Integration
An example of a company that has been successful in integrating an effective value chain,
are profitable, and earns customer delight would be Nike. Nike has built a brand that is
recognized on a global level and offers their customer high quality products. Although the cost
of their athletic and fitness wear may be more expensive than competitors (such as Adidas and
Under Armour), they continue to be profitable year after year. They have dominated the athletic
wear market and implemented an effective marketing strategy. Nike’s mission is to “bring
inspiration and innovation to every athlete in the world” (Nike, 2016). Nike’s customers expect
top quality and innovative products and have built customer loyalty due to being able to connect
with them by meeting their needs.
Another example of a company that has been successful in integrating an effective value
chain, are profitable, and earns customer delight would be Walmart. Walmart has been
successful in developing the ability to provide their customers with a wide range of products and
services that meets their demands and needs. The company has a large number of distribution
centers that allows them the ability to provide each of their domestic stores with products within
a single day. Walmart is known for their low prices which gives them a competitive advantage.
Unsuccessful Integration
An example of a company that has been unsuccessful in the integration is Kodak. Kodak
at one time was the leader in film and imaging products. They had possessed a strong value
chain which focused on quality products. However, the main reason why their integration failed
was due to their product flexibility and inability to change with the market and needs of their
customers. As technology advanced, digital cameras and film became a demand from customers
and Kodak was not able to change their products to meet these demands. Their value chain
started to decline and other companies started offering products that Kodak could not.
Another example of a company that has been unsuccessful in the integration process is
Blockbuster. In the early 1990s, Blockbuster was the undisputed leader of video rentals. Their
value chain focused on cost and flexible for their customers, creating movie experiences. In the
early 2000s, companies such as Netflix was founded which provided customers monthly
memberships to watch movies from their electronic devices. As digital technology continued to
grow, Blockbuster was unable to compete with their competitors and customers no longer found
a need to physically go into their stores to rent movies. As the demand for movie rentals
declined, so did their profits and customer loyalty. Blockbuster had the opportunity to purchase
Netflix but failed to do so and this showed to be a devastating decision that was the start of their
demise.
Conclusion
A company’s successful is based on their ability to be and stay competitive. The value
chain has a direct correlation to their competitive advantage. There are four dimensions of
competitiveness and a company can choose to focus on one or more of them. In order for a
company to establish a competitive advantage, they need to have an effective value chain
management, profitable, and customer delight. These elements are a reflection of the strength of
the value chain and their ability to integrate. The more competitive a company can stay, the
more success they will experience.

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