A Significance of Value Chain Analysis in Assessing Competitive Advantage of an Organization

Value chain analysis is a powerful tool for managers to identify the key activities within the firm. Value chain analysis is essential to an understanding of markets, their relationships, the Participation of different actors, and the critical constraints that limit the growth There in, competitive advantage of an organization lies in its ability to perform crucial activities along the value chain better than its competitors. A company may benefit from cost advantages if it either reduces the cost of individual activities in the value chain or the value chain is essentially reconfigured, through structural changes in the activities. A systematic analysis of the value chain can facilitate effective outsourcing decisions. Therefore, it is important to have an in-depth understanding of the company's strengths and weaknesses in each activity in terms of cost and differentiation factors. The research focuses on where are a company's unique capabilities in the value chain. How relevant are these capabilities to building a competitive position.Value chain analysis is concerned with what the organization is good at. Once strategic and non-strategic activities have been clearly understood, an organization should then identify specific strategic value chain activities that it is good at.