Learning Outcome:

Generate an organizational value chain analysis to

achieve competitive advantage
Explain and apply organisation and industry value
analysis in understanding value drivers and in
reconfiguring value chains
Apply the strategic management framework to develop
and implement organisational strategy
identify strategies that organisations can adopt to
deliver value to stakeholders.
Two types of value creation in any organization:
1. Customers Value: Porter (1985) focuses on the importance of
customer value: Value is what buyers are willing to pay, and
superior value stems from offering lower prices than
competitors for equivalent benefits, or providing unique
benefits that more than offset a higher price.
2. Shareholders Value: Kaplan and Norton (1992) focus on
customer value as a leading indicator of shareholder value: A
companys ability to innovate, improve, and learn is directly
linked to the companys value. That is, only through the ability
to launch new products, create more value for customers, and
continually improve operating efficiency can a company
penetrate new markets and increase revenues and marginsin
short, grow, and thereby increase shareholder value
1. Collaboration
2. Innovation
3. Efficiency
4. Market awareness

Management accountants must be able to:

Identify and measure value drivers
Measure inputs and outputs of value creating activities
Plan for, control and maximise value creation
Eliminate non value-adding activities

Impediments to value creation

1. Lack of understanding of value
2. Self-interested behaviour
3. Negative competition and functional orientation
Value chain framework useful in
analysing competitive advantage
Five forces- starting point for
SWOT analysis
Helps to identify
opportunities/threats
Two major strategies - cost
leadership and product
differentiation
Most attractive competitive
position is a hybrid - cost-cum-
differentiation strategy
Adapted from J. Viljoen & S. Dann 2000, Strategic Management: Planning and Implementing Successful Corporate Strategies,
3rd edn, Longman, Melbourne, pp. 2689
Margin is the excess the customer will pay over cost for activities
Margin represents value created by value activities
Linkages connect activities in the value chain
A firms value chain is linked to a value system which includes the
value chains of several organisations

Value chains will differ

Depending on the organisation, the position of activities in the value
chain might differ from that in Porters generic model. Some
organisations push their products, that is, they manufacture their
products and then attempt to sell them.
1. threat of new
entrants to the industry
2. threat of substitute
products
3. power of customers
4. power of suppliers
5. intensity of
competition
Political Other versions of PEST exist that broaden the
Economic frame for the analysis:
Socio-cultural SLEPT (adds Legal to PEST).
Technological PESTEL (adds Environmental to SLEPT).
STEEPLED (adds Education and
Demographics to PESTEL).
 Major strategies of firms and business units
MACS and strategies
Value chain ideas and links with strategies
Porters value chain ideas
Porters five forces for analysing industries and competitors
Need for a dynamic theory of strategy

ANY QUESTIONS?