With regard to today's dynamic and fiercely competitive business environment can Porter's value chain analysis model help organisations to develop and deliver sustained competitive advantage? This essay will define Porter's value chain model and his value system including it's primary and secondary activities and how this impacts profit margins. It will explain Porter's five external forces which impact organisations including additional external forces which are not included in Porter's models. The essay will explain the generic strategies used by organisations to achieve competitive advantage including differentiation and focus. The essay will compare other theorist's views on how organisations business strategies could improve competitive advantage in comparison with Porter.
The concept of value added to develop an organisation's sustainable competitive advantage was developed mainly by Professor Michael Porter (1985) of the Harvard Business School. He advocated that there are two main routes to adding value. These are the 'value chain' and the 'value system'.
The value chain identifies where value is added in an organisation and links the process with the main functions of an organisation. The value system shows the wider routes in an industry that add value to incoming resources, outgoing distributors and customers.
Important elements in adding value are; having a close relationship and a comprehensive understanding of a customer base and in particular understanding their perception of what represents value. Having an organisational commitment to providing quality and an all round high level of service to the customer. Being able to speedily react to competitive opportunities and external threats and having the ability to provide innovation within the organisation. (Thompson. J, Martin, F. 2005)One of recognised routes of adding value was developed by Porter (1985) who claimed:Every organisation consist of activities that link together to develop the value of the business purchasing supplies, manufacturing, distribution and marketing...