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Here Are the Different Types of Competitive Advantages of Value Chain Analysis

Value chain is basically the internal activities of a firm that are undertaken to convert inputs into outputs. The identification of primary and support activities that are responsible for adding value to a product and then analyzing it in order to either increase the differentiation or decrease cost of product is known as Value Chain Analysis.

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Types of competitive advantages

There are two different approaches to Value Chain Analysis. However in order to find out the ways of performing this analysis you have to first find out the type of competitive advantage that a particular company wants to form. The two types of Value Chain analysis are Cost Advantage and Differentiation Advantage.

Cost Advantage

This is the approach used by companies who want to compete with other companies in terms of cost and try finding out various sources that are helping them to get a cost advantage. It also tries to find out different ways that are responsible for driving cost.

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Differentiation Advantage

This approach is normally adapted by those companies who want to produce superior quality products or services as compared to their competitors.

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Steps that will help a company gain cost advantage

  • First and most important step to gain cost advantage is to identify both primary as well as support activities of an organization.
  • Importance of each of these activities in determining cost of the product
  • Cost drivers for each of these activities have to be identified
  • You also have to find out links that are there between different activities
  • Finding out different ways that will help an organization in reducing their cost.

Steps that will help an organization gain differentiation advantage

  • First you have to identify value creating activities of the customer
  • Then you have to properly evaluate different strategies that will help in increasing value of the customer
  • Try to find out best workable differentiation.

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