Running Head: Weekly Report 3 1

Table of Contents
Chapter 3 ......................................................................................................................................... 2
Interrelationship and expanded relationship to other stakeholders in the business ........................ 3
Prosumer’s Concept ........................................................................................................................ 4
Resource Based View ..................................................................................................................... 4
Tangible resources....................................................................................................................... 4
Intangible resources..................................................................................................................... 5
Organizational Capability ............................................................................................................... 5
Sustainable Competitive Advantage ............................................................................................... 5
Organization’s profit and its relationship to people’s profit ........................................................... 6
Evaluating Performance of Firm ..................................................................................................... 6
Running Head: Weekly Report 3 2

Chapter 3

In this chapter, I will review the concept of value chain analysis, which is described as an

analysis of the activities of the organization internally. The purpose of this tool if finding which

activities are valued generator, and which should be improved for building competitive

advantage. Most of the time, we have only one specific activity in the organization that creates a

competitive advantage for us.

It can be asked by having a SWOT analysis on why we need to use this tool. Therefore, it

should be mention that SWOT analysis can be considered as a starting tool for our analysis

because it has several limitations. First, this tool will focus on one-time analysis, and it will not

evaluate the situation in the period of time. This tool also can not help us to recognize the

strengths which can create a competitive advantage over time, and in a sustainable way. So, for

having a comprehensive analysis, we use form value chain analysis.

In every business, we have two types of activities: (1) primary (Figure 1), and (2)

support. Inbound logistic contains the process of how to receive, store, and distribute the

products that come into our business, which contain the process such as designing the layout in

business to increase operation’s efficiency. Operations are containing the whole process of
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building a product from its raw materials. Regarding outbound logistics, we have the similar

process of logistics but in an outside way to the customer line. Marketing and sales cover all the

activities to introduce the products to end users through sales channels by considering the price

element, promotion strategy, and advertising strategies. Service is covered tasks such as

installation process, repairing, training, and adjustment of the product, which add or sustain

value to our products.

For support activities, procurement refers to the process of purchasing those goods that

are necessary and vital for the business’s performance. General administration helps us to plan

and support the whole system to reach to the defined objectives and goals. In human resource

management, we manage our all factors that affect our human assets such as compensation

program, training, and recruitment events. In technology development covers all the strategies

and techniques, and tasks that help us to use a new concept, ideas, and technology in our

business’s operation.

Interrelationship and expanded relationship to other stakeholders in the business

There are two kinds of relationship in the value chain. First can be defined as a

relationship between those mentioned activities, and the second relationship is between those

activities and other parties such as customers, suppliers, and vendors. In this regard, some

research suggested that the coordination and optimization of this relationship can be created

competitive advantages.

In my opinion, the IT can enhance this relationship, and from my perspective, IT has

changed its traditional role as support activity in primary activity. For example, Lufthansa

airlines with the help of its IT infrastructure and powerful website helped its sale and marketing

activity to have a competitive advantage among that airline who use code sharing flight.
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Prosumer’s Concept

This concept was one of the IBM studies, and it means that our customers are our

producers too. In other words, this world wants to show the vital role of customers in our

production. Nowadays, more and more companies use from customization in the value chain. In

this way, we can realize why Procter & Gamble define a new mission, and it was ‘consumer is

our boss.’ By defining this mission, this company integrates consumers by having co-design and

co-engineering products.

Figure 1. Activities in the value chain.

Resource Based View

This tool can help us to understand and interpret the organization’s resources, which can

lead to recognizing the strategic resources that are the creator of the competitive advantage for

the business. there two kinds of resources: (1) tangible and (2) intangible which will be explained

in the following sentences.

Tangible resources

 Finance: it contains all the elements that affect the financial situation of the

company such as a cash account, cash equivalent, and capacity of the company to borrow money.
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 Physical: Those elements such as place, equipment and stuff that physically

should be in the business.

 Technological: it covers the trade secret, the copyright, patents, and trademark.

 Organizational: it contains the evaluation process, and the control system and the

strategic planning process.

Intangible resources

 Human assets: real assets of our organization are our human, and for managing

them, we should learn to manage them effectively. In my opinion, this can be found in the green

human resource approach that considered as a value in the eye of the customers.

 Innovation and creativity: this activity help us to make our business more durable,

and it contains the innovation capability that helps us to think and work.

 Reputation: those elements that build the brand image and name of the company

that has value for customers and suppliers. For example, Harley-Davidson company has created

its powerful image in mind of even ordinary people even if they are not a motor rider.

Organizational Capability

This concept refers to those skills and competencies that the company has in output

transformation. In fact, we measure the capacity we have in our organization to manage the

tangible and intangible resources to create advantages in our business.

Sustainable Competitive Advantage

Resources should have some characteristics of being strategic. It should be valuable, rare,

being difficult to imitate, and being difficult to substitute. For being inimitability, we use from

path dependency; it means that it is hard to supply these materials by potential competitors. Also,

in this regard, we can also use causal ambiguity and social complexity.
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Organization’s profit and its relationship to people’s profit

In every business, employees and managers help the business to obtain profit, in this way

they expect to have a suitable amount of this money in the form of bonus, rewards, and

compensation. There four elements that affect this profit, and there are:

 Bargaining power

 Replacement cost

 Exits cost

 manager bargaining power

We consider Professor Vincenti has an offer from another university. So, the UCW has a

big problem as big boss has a critical role in both educational and managerial part of the

organization, and he values generator for us. Also, he is a professional Italian; this means that he

has a high power of negotiation and power because of his excellent reputation. For UCW, it is hard

to find a substitute for him, and we should he could also consider a threat for us if he accepts

chairmen position in other competitors.

Evaluating Performance of Firm

For evaluation of the performance of the organization, we use two approaches of financial

ratio and Balanced Scorecard Analysis. in the first approach, we use from market value, solvency

(long term-short term) and profitably ratios in the organization. In this way, we use and compare

the information for benchmarking of key competitors and industry norms over time. In the second

approach, we integrate the stakeholder perspective with financial analysis. In the balanced

scorecard, we should think that how customers see and evaluate us. From our perspective, we

should figure it out how we want to excel. Also, another question can be this: does our business
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create and build value continuously, and how the company looks in term of financial approach to

shareholders. It can also help managers to consider the business from the customer’s perspectives,

internal business, innovation and learning, and financial perspectives. The benefits of the balanced

scorecard can be:

 Providing a better strategic planning

 A better strategy in internal and external communication

 Making a better alignment between initiatives and projects.

 Better alignment between strategy and operations

 Better alignment with a process such as risk management, budgeting with strategies

priorities.