I recently wrote about Michael Porter’s concept of competitive advantage, and now I’d like to start really drilling down into the value chain analysis he uses to diagnose competitive advantage. A value chain analysis disaggregates a company into its activities, grouped by function, to understand how different activities contribute to or detract from competitive advantage. The analysis assesses both each individual activity and also how they are linked and configured. Often, it’s the connections between activities that provide the greatest advantage and are the hardest for competitors to imitate, rather than just a handful of specific processes.
To bring the value chain to life, I thought I would take an example from consumer packaged goods that includes each of the generic competitive strategies: cost advantage, differentiation, and focus. I’ll be looking at Clorox, Procter & Gamble, and Method Products in detail over multiple posts. I don’t know much about these companies to start with, so you’ll have a chance to see the good, the bad, and the ugly of a value chain analysis done from scratch. Continue reading Competitive Advantage by Michael Porter, Part 2