Leg 6. From Hong Kong to Auckland (X). The Value Chain Analysis can be used by everyone.
Who uses the Value Chain Analysis?
Good afternoon. Wishing you a beautiful afternoon. Thursday is my favorite day. I love it because I am able to do my writings outside my home. I usually do it from a coffee shop. And I tend to change coffee workstations too. Today I decided to write from Starbucks. Sometimes I don´t have a single penny, and this has reduced my number of visits to coffee shops. It is part of the life of entrepreneurs at initial stages. As an entrepreneur, I have reduced my costs to the minimum. I think I have told you I live with my parents and given their limited budget at home, all my lifestyle changed during the last 5 years. In addition, I have not traveled to the USA for several years (since my last training about Credits and Financial Valuation in Washington D.C. by the World Bank in the year 2011). In consequence, I have not had the pleasure to taste a cheesecake from the Cheesecake Factory since then. Sad eh! 😦 And, There is no Cheesecake Factory in town either. But in the past, for several years of my life, I was traveling a lot and I had the opportunity to eat cheesecake every time I went out of El Salvador. Yesterday I promised to you to bring an example on how to apply the Value Chain Analysis with the Cheesecake Factory differentiation strategy. Of course, I will fulfill my promise to you, but given the application of the VCA Framework, for the sake of giving you the whole process, we will postpone the Cheesecake Factory example after we finish the rest of the themes of Leg 6. We need to learn some buzzwords and concepts more, before applying it. I would like to give you all the theoretical concepts of Leg 6 first. And after our arrival to New Zealand, we will have some days in Auckland to do the application of the whole topics we have learned during these three weeks. The Cheesecake Factory example can wait for a few days. Don´t worry, I always deliver what I promise.
Let’s see where is our fleet at the moment? We believe they are happy again. They have started to feel the wind again. The Doldrums are passed, and the wind is now between 6 to 8 Kt.
Let´s see where we are in our strategy race at the moment:
Who uses Value Chain Analysis? Let´s start.
The answer: Everyone who is involved in a beautiful business has to use and know how to apply the Value Chain Analysis. All companies from all industries (no matter what level of technology) can be analyzed using the Value Chain (for Cost Analysis, and/or Uniqueness Analysis). Whatever is your strategy (Cost, Differentiation, or if you are stuck in the middle of a hybrid strategy Cost and Differentiation) has to know at least the basics of Value Chain Analysis.
Once we can identify and classify important tasks and functions into the categories of value activities, then here we are: we are now talking about a Value Chain. Buyers have value chains. Suppliers have value chains. Industries have value chains. Municipalities have value chains. Government Bureaus have value chains. Cities have value chains and Countries have value chains. And our beautiful companies have value chains.
In the case of the private sector: I recommend this framework be known and understood by the CEO or the upper superstructure of our firms. Why? Because Value Chain Analysis is usually left to operations only. And that is a terrible mistake. The exercise of creating a Value Chain has to be done by multidisciplinary teams: human resources, marketing, sales, operations, and support staff, have to participate in the elaboration of it. Consulting firms are hired to help.
In the case of industries associations, each of the industries such as manufacturing, retail, services, technology, oil and gas, agriculture, education, hospitality, health, etc. must have to do the homework of their specific Value Chain too.
In the case of the public sector: Government, municipalities, and government agencies have to adapt the value chain concept to their services value proposition. Their value chains will differ a bit from the private companies value chains, but the level of refinement when defining the value activities must be done very well and with excellency.
In the case of International Cooperation Entities, or Development Financial institutions such as the World Bank, Interamerican Development Bank, United Nations, etc must have their own value chains (general) and by divisions or regions. A value chain created by the UNDP in one African country is not the same one for El Salvador. Why? Simply because the strategy for one country can be of low cost, and the strategy of another country requires a differentiation strategy. And in addition, the buyer needs of the UNDP services (the country citizens priorities) are different in each country.
Let´s rephrase it in a different manner: The Value Chain for Argentina is completely different than the Value Chain of Spain, or the Value Chain of India. We must understand each country has different needs and has different resources, different macro or microeconomic conditions and different life-cycles, industries, and strategies. The emergence of the Global Value Chain concept (GVC) is a whole theme I will be happy to develop in another Volvo Ocean Race because it is a fantastic topic which is interesting to learn. I love this topic very much, and believe me, when I write, the GVC theme will take us at least 9 months of sailing. What is a Global Value Chain?: “the full range of activities that are required to bring a product from its conception, through its design, its sourced raw materials and intermediate inputs, marketing, distribution and its support to the final consumer”. When activities must be coordinated across geographies, the term global value chain (GVC) is used in the development literature.
This is all for today. Wishing you just the best. Blessings from San Salvador. Cheers!
15:46 pm – San Salvador.
Disclaimer: All the presentation slides shown on this blog are prepared by me. Nevertheless, all the pictures or videos shown on this blog are not mine. I do not own any of the lovely photos posted unless otherwise stated.
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