Value Chain Analysis And Recommendations For A Small Business In The Retail Sector

Value Chain Activities

Value chain analysis is a useful tool in strategic management which helps in analysing the internal activities of a business. The main goal of the value chain analysis is to identify which activities are the most valuable activities of a firm and which activities could be further improved in order to create competitive advantage for the firm in the market. This report focuses on the value chain analysis of two public companies of Australia and accordingly identifies opportunities for a fictitious small business in order to mimic their approach for gaining competitive advantage.

The value chain activities can be classified into primary activities and support activities. The primary activities of the value chain activities are inbound logistics, operations, outbound logistics, marketing and sales, services. The support activities of a value chain are infrastructure of the business, procurement, management of human resources and technology.

The value chain analysis of Coles is as follows:

The value chain analysis is the process through which the Coles supermarket has divided its value creation activities. The goal of the activities at Coles is to offer customer values which surpasses the cost related with the activities and therefore helps in creating a margin of profit for the company. All the activities of Coles are aimed towards attaining and delivering the activities of the company. The analysis of the primary activities at Coles is as follows:

In-bound logistics- Being a retailer, Coles does not manufacture the products which it sells through its stores and therefore they control the distribution network of the products. Procurement and logistics are the two main activities which helps the company to deliver on its promise. The products of the company which are received from the producer are transported directly to the national or regional distribution centre where the qualities of the products are checked before it is distributed to various stores of the company.

Operations- The operation activity of the company cover two primary activities which ensures customer, convenience and value, improved quality assessment and proper management of the inventory. As stated by Dapiran & Kam (2017) the company has put in place effective checks and balances in order to make sure that from the time, the stock reaches the store, to the time they are displayed on the store shelves, the company detect and remove defective and faulty products. The minimum presentation level of each product is also tracked by the company in order to ensure that the product do not fall below the required levels. The SOS system of the company keeps a track of the sale of the products and it helps in authorizing re-stocking of products when they fall below minimum level. The company uses modern and innovative forecasting models which helps in evaluating change in consumer demands in order to optimize the sales of the products of the company.

Value Chain Analysis of Coles

Marketing and sales- The main activities which ensure the success of marketing and sales endeavour of Coles are In-store promotion and organization dynamism. As opined by Fragouli & Kouli (2016) in order to increase the sales of the product, the company reduces the prices of certain products of the company significantly and in order to supplement the offer, the company provides various catalogues and also sends promotional mail to the customers in order to inform the about the availability of the offer of the products of the company and this particular strategy have proved beneficial for the company in enhancing the sales of the products of the company. The company remains highly efficient in determining the change in consumer preferences and accordingly provides the customer with the products of the company.

There are also various activities within the value chain of the Coles which helps in achieving the mission of Coles and are as follows:

Outbound logistics- The outbound logistics of the company is responsible for distributing the products of the company to the various branches of the company across the country through the efficient distribution network of the company by owning and operating distribution trucks which ensures effective and timely distribution of the products of the company.

Services- As stated by Gallarza, Ruiz-Molina & Gil-Saura (2016) the service activity of the company helps supporting the customers of the company in understanding the value of the products offered to them and also helping them in locating the products of the company in the store and also by providing after sales support and assistance o the customers regarding the products.

Technology- The supply chain value addition services of the company are supported by superior quality technology of the company which cannot be substituted by any other firm in the market.

Human Resources and Infrastructure- The company boasts of a high level of infrastructure which helps in effective achievement of the goals and objectives of the company and also the availability of highly skilled and experiences human resources of the company helps in transforming the strategies of the company into actions.

The value chain analysis of Woolworths reveals that the sourcing strategy which is being followed by the company is targeted for achieving sustainable advantage for the company in the market in which the company has adopted sourcing strategy of local products in order to make sure that the local firms of the country undergo growth and development. The strategy of the company regarding sourcing products from local suppliers is not only targeted for supporting the growth and development of the local producers of the country but the procurement process of the company also shows support towards sustainable development. The products which the company procures from local suppliers are being processed accordingly and are sold under the brand name of Woolworths in the company stores. As opined by Tinta (2017) in order to ensure the availability of the products in the stores of the company, the company has highly invested in developing its distribution network of the products in which the products which are being sourced by the local producers are accordingly checked for quality assurance and they are accordingly packaged and transported to the various stores of the company through a fast distribution network. The high quality operations of the company ensure that the products of the company do not fall below minimum level in the stores of the company and the highly effective operations of the company which is integrated with highly innovative IT tools and solutions which helps in effective forecasting of customer demands and requirements regarding the products of the company. The company ensures effective marketing and sales of their product through their physical stores and also through their online platform by using various promotional tools such as in store promotions through catalogues, sales promotion and advertising of their products.

Value Chain Analysis of Woolworths

The primary activities of Woolworths are provided support by a large range of the supporting activities of the company such as highly skilled employees across the country, high quality company IT infrastructure and supply chain systems of the company which are supporting in nature. The people are at the heart of the business of the company, and therefore a particular culture and strategy is being implemented in the company in order to support the customers. According to Gawankar, Kamble & Raut (2016) the company is committed towards building internal capability and therefore it employs diverse people in its company. There is facility of training and development of the human resources of the company regarding increasing their skills and capabilities and in order to accomplish their strategic goals. The infrastructure of the company is also highly excellent in nature which is evident from the fact that the company is widespread and highly popular in both Australia and New-Zealand as a result of development of high quality infrastructure integrated with innovative IT tools and processes.

SME’s cannot copy the approach of value chain which are being adopted by the larger players of a particular sector due to financial constrain and lack of resources but however small businesses or SME’s can integrate IT to various value creating activities of their value chain in order to gain competitive advantage in the market.

The recommendations for a fictitious SME’s operating in the retail sector regarding copying the approach of larger player of the industry in order to gain competitive advantage are as follows:

• According to Hänninen Mikko, Anssi, & Lasse (2018) the business should focus on integrating IT in the various activities of the supply chain which can create value for the company such as marketing and sales by utilizing social media and online platform in order to engage and involve with customers in order to analyse their demands and requirements regarding products and services and therefore it will help in creating competitive advantage for the company.
• The business should focus on sourcing raw materials from local suppliers and manufacturers rather than manufacturing their own product for reducing the operational costs of the business which will help in cost competitive advantage for the company.
• The business should focus on integrating IT solutions and tools in the operations of the company such as ERP solution in order to streamline the processes and functions of the business which will help in exercising full control over the supply chain of the company by enhancing visibility.
• As opined by Li & Jiang (2013) the business should focus on using IT tools in order to develop the infrastructure of the company so that it remains successful in estimating the demands and requirements of the customers of the company and provide products accordingly to their customers which will help in creating competitive advantage for the business.
• As stated by Jiang & Zhao (2014) the business should focus on using advanced IT tools for providing training and development of the employees of the company such as content authoring tool, social media, video editing tool and learning management software which will enable the employees to provide high quality service to the customers, thus creating competitive advantage for the company.
• The business should also focus on adopting advanced technological advancements and innovations in the company at a faster rate in order to take advantage of various trends in the market and also for increasing its efficiency which will help in driving competitive advantage for the company.

Conclusion

From the above analysis it is clear and evident that effective value chain analysis helps in improving the activities off a business and thereby helps in driving competitive advantage for the firm in the market. From the analysis it can be also observed that the effective integration of IT with the activities of a value chain of a business can contribute to the overall efficiency of the business and therefore will help in creating competitive advantage for the business

References

Dapiran, G. P., & Kam, B. H. (2017).Value creation and appropriation in product returns management. International Journal of Logistics Management, 28(3), 821-840. doi:https://dx.doi.org/10.1108/IJLM-11-2015-0199  

Fragouli, E., & Kouli, P., M.B.A. (2016). RETAIL COMMERCE & BIG RETAIL CHAINS E: THE CASE OF DIY (DO IT YOURSELF) SECTOR. International Journal of Information, Business and Management, 8(2), 259- 276. Retrieved from https://search.proquest.com/docview/1778467506?accountid=30552

Gallarza, M. G., Ruiz-Molina, M., & Gil-Saura, I. (2016).Stretching the value-satisfaction- loyalty chain by adding value dimensions and cognitive and affective satisfactions. Management Decision, 54(4), 981-1003. Retrieved from https://search.proquest.com/docview/1786770290?accountid=30552

Gawankar, S., Kamble, S., & Raut, R. (2016). Development, measurement and validation of supply chain performance measurement (SCPM) scale in retail sector. Benchmarking, 23(1), 25-60. doi:https://dx.doi.org/10.1108/BIJ-06-2013-0068

HänninenMikko, Anssi, S., & Lasse, M. (2018). Digitalization in retailing: Multi-sided platforms as drivers of industry transformation. Baltic Journal of Management, 13(2), 152-168. doi:https://dx.doi.org/10.1108/BJM-04-2017-0109

Jiang, Y., & Zhao, J. (2014).Co-creating business value of information technology. Industrial Management & Data Systems, 114(1), 53-69. doi:https://dx.doi.org/10.1108/IMDS-04- 2013-0171

Li, Y., & Jiang, W. (2013). Integrated supply chain of customer relationship management optimization. Contemporary Logistics, (13), 36-40. Retrieved from https://search.proquest.com/docview/1617928616?accountid=30552

Tinta, A. A. (2017). The determinants of participation in global value chains: The case of ECOWAS. Cogent Economics & Finance, 5(1) doi:https://dx.doi.org/10.1080/23322039.2017.1389252