Using Value-Chain Analysis to Discover Customers' Strategic Needs

4789 Words Nov 8th, 2010 20 Pages
Using value-chain analysis to discover customers’ strategic needs
David W. Crain and Stan Abraham

David Crain, a marketing and strategy consultant, is visiting professor of marketing at Whittier College, CA, and former Director of Marketing at Fluor Corporation (davidwcrain@aol.com). Stan Abraham is professor of strategy and entrepreneurship at Cal Poly Pomona (scabraham@ csupomona.edu) and author of Strategic Planning: A Practical Guide for Competitive Success (Thomson South-Western, 2006).

ere is a five-step method for discovering a customer’s particular strategic needs based on a unique application of value-chain analysis.[1] Performing this analysis on important customers helps identify high-value new business opportunities. It
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The firms that are considered major integrated oil companies participate in a significant number – sometimes all – of these external (upstream and downstream) and internal value-chain elements. In a 2006 issue of Strategy & Leadership, authors Wayne McPhee and David Wheeler suggested that strategists should use Porter’s concept to consider value-chain operations beyond the boundaries of the firm (see Exhibit 2).[5] (The figure shows Porter’s original concept of an internal value chain as well as several ‘‘external’’ additions suggested by the McPhee and Wheeler.) Since its introduction, value-chain analysis has proven immensely valuable in three principal ways – cost analysis and reduction, differentiation, and product development – but the standard practice was for firms to analyze only their own value chain.

Step 2: How to construct a customer’s value chain
First, recognize that you need to construct both internal and external value chains for a particular customer. The internal value chain follows Porter’s original concept, which includes value-added steps from purchasing to distribution as well as support functions such as R&D and human resources. It’s tempting to let this generic diagram serve as the customer’s value chain, but it must be tailored to the particular customer. To produce a useful value-chain

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