Page 219 - (DK) The Business Book

WORKING WITH A VISION 217

See also: Leading the market 166–69 ■ Porter’s generic strategies 178–83 ■ Red, yellow, or purple?
Good and bad strategy 184–85 ■ Porter’s five forces 212–15
Fashion retailer Benetton,
launched by the Benetton
advantage. Porter identified a set
family in Italy in the 1960s,
of activities that businesses can use
pursues a differentiation
to better understand how to achieve
strategy with its bold brand
these forms of differentiation. These
image. To achieve this, the
interrelated activities—dubbed the company has focused on every
“value chain” by Porter—describe When you’ve got only aspect of its value chain, from
the flow of a product from its initial single-digit market share— supply to satisfying the latest
supply to the final customer. and you’re competing with consumer fashions. To ensure
A company can add value to the the big boys—you either Benetton garments are
product at each stage of the chain, differentiate or die. up-to-the-minute, the company
through product-related activities— Michael Dell manufactures many of its
its inbound logistics (supply of parts US founder of Dell Computers (1965–) clothes in gray, then dyes
or materials), manufacturing, and them to meet the demand for
whatever colors are in fashion.
after-sales service—and market-
Although this is costly in
related activities: outbound
production, it minimizes stock,
logistics (the delivery of products
reduces wastage, and enables
to the end user), and marketing
the company to respond
and selling the product.
quickly to changing consumer
as “overheads,” secondary value tastes. Benetton stores are run
Gaining the advantage can be generated, for example, by agents, and garments are
To achieve competitive advantage, through better use of technology. shipped directly to the stores
a company cannot focus on one In addition to their horizontal and immediately placed on the
activity alone, but needs to activities, companies operate in a shelves. This creates a strong
consider each of the activities in “value system” of vertical activities, value system, keeps costs
the chain. For example, Mercedes- such as a manufacturer who buys lower, and allows each part of
Benz pursues a differentiation parts from suppliers and outsources the chain to absorb fluctuations
strategy, first through producing a its distribution. Competitive in demand. Benetton has more
than 6,500 stores in more than
high-end product, but also through advantage relies not only on the
120 countries, and its turnover
providing outstanding after-sales company’s value chain, but on the
exceeds $3.2 (€2) billion a year.
service. Analyzing the value chain value system of which it is a part.
can also help companies to identify
what areas of their business might Reinventing value
be suitable for outsourcing, which Porter’s theories on competitive
can help the company to achieve advantage were highly influential,
a cost advantage. and have been built upon by other
Primary value-chain activities in business theorists. Management
a company are supported by a series scholars Richard Norman and Rafael
of secondary activities, which can Ramirez argued in 1993 that the
also be used to achieve competitive market complexity of the 1990s
advantage. These activities vary required companies to “reinvent”
by industry, but typically include: the notion of value beyond the linear
purchasing (procurement); human thinking of the “chain.” In 1995,
resource (HR) management; US executives Jeffrey Rayport and
technology development, including John Sviokla drew parallels with
research and development (R&D); the emerging world of the Internet, Benetton’s value chain boosts
its differentiation advantage.
and infrastructure functions, such suggesting that value could be
Clothes can be dyed in fashionable
as finance and legal. Although added to online activities and colors to match customer taste.
support activities may be viewed products in a “virtual” value chain. ■