Businesses have to be strategic to ensure they make the highest profits. They can achieve high profits by engaging in value chain activities to ensure that consumers attain goods and services of their demanded quality. The value chain involves all the activities that revolve around the item’s conception to the distribution to customers (Linkov et al., 2020). It categorizes into two sections primary and support. The primary level comprises five activities: inbound logistics, operations, outbound logistics, marketing and sales, and services. Conversely, the support category consists of procurement, technological development, human resource, and infrastructure. The value chain process aims at increasing business efficiency and delivering the worthiest item or service while applying cost management practices. A value chain is important for developing sustainable business strategies that tap into maximum resource utilization to generate items of desirable quality.
Factors Determining the Attractiveness of Different Stages of Value Chain
The support category comprises factors that determine the relative attractiveness of different value chain stages. Analysis, strategy development, planning, implementation, and control are the stages involved in the value chain process. These strategies determine how effective the production process is and significantly contribute to the final product’s quality. In the first stage, the analysis stage, the business figures out areas in its production process that need polishing to improve the value. After identifying these areas, the management creates ways they can develop more efficient strategies. Since strategies play a vital role when approaching a specific objective, the firm must ensure that its strategies guarantee a high success rate. Proper planning and execution of the formulated ideas follow, respectively, and eliminate the shortcomings in the product outcome and sustain customers since they receive the best quality goods.
All elements of the support class of the value chain are also the factors that determine the attractiveness of these value chain stages. Infrastructure, human resources, development, and procurement are businesses’ means to influence the value chain (Koval et al., 2019). For example, in Netflix’s case study on the Value Chains, Outsourcing, and Procurement module, Netflix uses technology development to improve its value. The company moves its services from downloading using DVDs to streaming its series. The technological move encourages the value of the company’s fil products, thus increasing the viewership and customers’ subscriptions to its timelines. By 2019, Netflix had 158 million subscribers globally, indicating the impact of technology on the attractiveness of different value chain stages (Lonsdale, 2022). A company’s technology in production is the key to its growth and development.
Another factor that appears in Netflix’s case study is human resources because it ensures business prosperity by ensuring that the desired property is realistic and measurable. The value chain process encourages the division of labor and specialization at different stages to enhance effectiveness and accuracy. Splitting work based on employee specialization motivates employees to work wholeheartedly towards making valuable products. Netflix employs over 5000 people in all of its functions and offers special multi-yearly employment contracts for its talent, such as Ryan Murphy.
Procurement is the process of purchasing different inputs a business requires to complete its tasks effectively. In the value chain, procurement is essential because it provides materials that complete the production process by improving the quality of the product or service components. Netflix initially outsourced some of the series it aired from other film industry participants such as Disney, Warner, HBO, Universal, and others (Lonsdale, 2022). This stage often uses procurement to bring in different materials to improve Netflix’s variety of its products. However, after some time, these companies launched their streaming channels, limiting the amount of outsourcing and encouraging insourcing by Netflix (Lonsdale, 2022). Thus, Netflix began filming its original series using its employees. This act gives Netflix a positive value chain since it manages its costs to outdo the growing competition.
How These Factors Link to a Firm’s Strategic Positioning Decisions
Factors affecting the attractiveness of different stages of the value chain link to a firm’s strategic position decision in many ways. Strategic position refers to a company’s choices about its value and how it will be unique from what rival competitors create. Strategic positioning enhances innovation and helps the company create a unique brand from what others develop, giving it a competitive advantage. All the factors in the support classification of the value chain link to the strategic positioning in specific ways. First, technology links to strategic positioning by aiding create highly competitive quality items. A firm will enjoy a competitive advantage if its products are of higher quality and are better priced. Netflix’s operation changed from using DVDs to streaming its films, enhanced control over the market share calling more subscribers than other competing brands (Lonsdale, 2022). Therefore, technology links to a firm’s strategic positioning by reducing labor costs and saving time, thus affecting the firm’s decision to employ more people as a value-additional strategy.
The competitive advantage depends on the infrastructure within a specific boundary. Economic prosperity and strategic positioning rely on the infrastructure to determine the costs of the final products. A company in a less progressed region will often charge higher for its products than one located in a more developed place because the one in a less progressed region faces more difficulties outsourcing materials and distributing the final products. A company’s strategic position links with infrastructure development because it depends on infrastructure to bring materials into the plants and distribute them. Moreover, the firm uses infrastructure to run some basic production processes due to its power and water supply reliability.
Procurement links to a firm’s strategic positioning since it involves purchasing raw materials and other necessities that facilitate the production process. When a firm is outsourcing resources, it should consider the worth of the final product. If the company desires to produce high-utility products, the decision will involve outsourcing materials that guarantee the desired quality. Thus, the procurement process links to the firm’s strategic positioning decisions by contributing to decision-making on the most efficient and cost-effective method. The company uses cost differentiation to recover the excess spendings on high-quality materials when cost management fails.
The value chain is a critical element of business and production since it involves quality regulation for the items produced. Businesses apply the process during the conception of a product idea to distribute the products and seek to promote quality delivery to consumers. It enhances business efficiency and develops a competitive advantage for the company since it targets areas that competitors do not oversee. The process involves different stages that vary in attractiveness due to infrastructure, human resources, technology, and procurement. These factors link to the company’s strategic position through price controls: differentiation and cost leadership.
Koval, V., Duginets, G., Plekhanova, O., Antonov, A., & Petrova, M. (2019). On the supranational and national level of global value chain management. Entrepreneurship and Sustainability issues, 6(4), 1922.
Linkov, I., Carluccio, S., Pritchard, O., Bhreasail, Á. N., Galaitsi, S., Sarkis, J., & Keisler, J. M. (2020). The case for value chain resilience. Management Research Review, 43(12)
Lonsdale, C. (2022). Netflix and value chains re-positioning. Value chains, Outsourcing and Procurement. Section 7.