 To
identify & evaluate whether its resources
have got any strategic value or not a firm
generally uses various approaches
 The approaches are---------1. Value Chain Analysis (VCA)--- A value chain identifies & isolates the various
economic value-adding activities (such as
differentiating a product, lowering the cost,
& meeting customer’s needs quickly) that
occur in some way in every firm
Value Chain Analysis offers an excellent
means by which managers can find the
strengths & weaknesses of each activity visà-vis the firm’s competitors
 It tells where low cost advantage exists, in
what ways each activity can be undertaken
so as to differentiate it from that of a firm’s
competitors
 The value creating activities of a firm,
according to porter, may be divided into two
categories ----Primary & Secondary Activities

Primary activities represent the important
tasks a firm performs to produce & deliver a
product or service to a customer
 These include inbound logistics, operations,
outbound logistics, marketing & sales etc.
 Secondary or Support activities work to
enhance or to help the functioning of
primary activities
 These include infrastructure, HRM,
technology development etc.

 VCA
involves the following steps:
 Identify Activities:
 a firm needs to divide its operations into
primary & support activity categories
 Within each category a firm may typically
perform a number of discrete activities that
may reflect its key strengths or weaknesses
 Allocate Costs:
 VCA requires managers to assign costs &
assets to each activity
Identify Activities that Differentiate the Firm:
 Here managers should try to identify several
sources of differentiation advantage relative to
competitors
 Examine the Value Chain:
 Once the value chain has been described,
managers should list the activities that are
important to buyer satisfaction & market success
 Keeping costs under strict monitoring, offering
value added service at each stage, doing things
better than rivals are part of this strategy

2. Strategic Advantage Profile(SAP):
 SAP tries to find out organizational strengths
& weaknesses in relation to certain success
factors (advantage factors or competence
factors) within a particular industry
 Many industries have relatively small but
extremely important sets of factors that are
essential for successfully gaining &
maintaining competitive advantages, known
as critical success factors (CSFs)
 CSFs have a significant bearing on the overall
growth of a firm within an industry
 Research
has identified four major sources of
CSFs in general------ Industry Characteristics:
 CSFs are often industry specific.
 CSF in supermarket chains include inventory
turnover, product mix, sales promotion,
pricing etc
 CSF in airline industry would be fuel
efficiency, load factors etc.
 No one set of CSF applies to all industries
 As industries change CSFs would also change
Competitive Position:
 CSFs vary with a firm’s position relative to its
rivals in the field
 Every competitive move by the big players poses
innumerable problems to smaller firms (e.g.price concessions, promotional offers etc)
 General Environment:
 Changes in any of the dimensions of the general
environment i.e., political, legal, socio-cultural,
demographic etc. can affect the CSFs
 E.g.– not giving tax exemptions to R&D
expenditure of pharmaceutical firms would
always come in the way of growth & expansion
plans of players in this field

 Organizational
Developments:
 Internal developments take the centre stage
& give rise to CSFs
3. Benchmarking:
 A benchmark is a reference point for taking
measures against
 The process of benchmarking is aimed at
finding the best practices within & outside
the industry to which an organization belongs
 The purpose is to find the best performers in
an area so that one could match one’s own
performance with them & even surpass them
When one is interested in finding out what is to
be compared, then there are three types of
benchmarking--- Performance Benchmarking: comparing one’s
own performance with that of some other
organization for the purpose of determining how
good one’s own organization is
 Process Benchmarking: comparing the methods
& practices for performing processes
 Strategic Benchmarking: comparing the long
term, significant decisions & actions undertaken
by other organizations to achieve their
objectives

R
S Kaplan & D P Norton came out with a
popular approach named as ‘Balanced Score
Card’
 It allows managers to evaluate a firm from
different perspectives
 The performance as assessed in one
perspective supports performance in other
areas
FINANCIAL
•PROFITABILITY
•GROWTH
CUSTOMER
•DIFFERENTIATION
•COST
•QUICK RESPONSE
OPERATIONS
•PRODUCT
DEVELOPMENT
•DEMAND
MANAGEMENT
ORGANIZATIONAL
•LEADERSHIP
•ABILITY TO CHANGE
1.
2.
3.
4.
The Financial Perspective: Does the firm offer
returns in excess of the total cost of capital?
The Customer Perspective: Does the firm
provide the customer with superior value in
terms of product differentiation, low cost &
quick response?
The Operations Perspective: How effectively &
efficiently do the core processes that produce
customer value perform?
The Organizational Perspective: Can this firm
adapt to changes in its environment? Does the
organization learn from its past mistake?