 To identify & evaluate whether its resources have got any strategic value or not a firm generally uses various approaches  The approaches are Value Chain Analysis (VCA)----  A value chain identifies & isolates the various economic value-adding activities (such as differentiating a product, lowering the cost, & meeting customer’s needs quickly) that occur in some way in every firm

 Value Chain Analysis offers an excellent means by which managers can find the strengths & weaknesses of each activity vis- à-vis the firm’s competitors  It tells where low cost advantage exists, in what ways each activity can be undertaken so as to differentiate it from that of a firm’s competitors  The value creating activities of a firm, according to porter, may be divided into two categories ----Primary & Secondary Activities

 Primary activities represent the important tasks a firm performs to produce & deliver a product or service to a customer  These include inbound logistics, operations, outbound logistics, marketing & sales etc.  Secondary or Support activities work to enhance or to help the functioning of primary activities  These include infrastructure, HRM, technology development etc.

 VCA involves the following steps:  Identify Activities:  a firm needs to divide its operations into primary & support activity categories  Within each category a firm may typically perform a number of discrete activities that may reflect its key strengths or weaknesses  Allocate Costs:  VCA requires managers to assign costs & assets to each activity

 Identify Activities that Differentiate the Firm:  Here managers should try to identify several sources of differentiation advantage relative to competitors  Examine the Value Chain:  Once the value chain has been described, managers should list the activities that are important to buyer satisfaction & market success  Keeping costs under strict monitoring, offering value added service at each stage, doing things better than rivals are part of this strategy

2. Strategic Advantage Profile(SAP):  SAP tries to find out organizational strengths & weaknesses in relation to certain success factors (advantage factors or competence factors) within a particular industry  Many industries have relatively small but extremely important sets of factors that are essential for successfully gaining & maintaining competitive advantages, known as critical success factors (CSFs)  CSFs have a significant bearing on the overall growth of a firm within an industry

 Research has identified four major sources of CSFs in general  Industry Characteristics:  CSFs are often industry specific.  CSF in supermarket chains include inventory turnover, product mix, sales promotion, pricing etc  CSF in airline industry would be fuel efficiency, load factors etc.  No one set of CSF applies to all industries  As industries change CSFs would also change

 Competitive Position:  CSFs vary with a firm’s position relative to its rivals in the field  Every competitive move by the big players poses innumerable problems to smaller firms (e.g.- price concessions, promotional offers etc)  General Environment:  Changes in any of the dimensions of the general environment i.e., political, legal, socio-cultural, demographic etc. can affect the CSFs  E.g.– not giving tax exemptions to R&D expenditure of pharmaceutical firms would always come in the way of growth & expansion plans of players in this field

 Organizational Developments:  Internal developments take the centre stage & give rise to CSFs 3. Benchmarking:  A benchmark is a reference point for taking measures against  The process of benchmarking is aimed at finding the best practices within & outside the industry to which an organization belongs  The purpose is to find the best performers in an area so that one could match one’s own performance with them & even surpass them

 When one is interested in finding out what is to be compared, then there are three types of benchmarking----  Performance Benchmarking: comparing one’s own performance with that of some other organization for the purpose of determining how good one’s own organization is  Process Benchmarking: comparing the methods & practices for performing processes  Strategic Benchmarking: comparing the long term, significant decisions & actions undertaken by other organizations to achieve their objectives

 R S Kaplan & D P Norton came out with a popular approach named as ‘Balanced Score Card’  It allows managers to evaluate a firm from different perspectives  The performance as assessed in one perspective supports performance in other areas

FINANCIAL CUSTOMER OPERATIONS ORGANIZATIONAL PROFITABILITY GROWTH DIFFERENTIATION COST QUICK RESPONSE PRODUCT DEVELOPMENT DEMAND MANAGEMENT LEADERSHIP ABILITY TO CHANGE

1. The Financial Perspective: Does the firm offer returns in excess of the total cost of capital? 2. The Customer Perspective: Does the firm provide the customer with superior value in terms of product differentiation, low cost & quick response? 3. The Operations Perspective: How effectively & efficiently do the core processes that produce customer value perform? 4. The Organizational Perspective: Can this firm adapt to changes in its environment? Does the organization learn from its past mistake?