You can address any of these questions (or any of the review questions on pg. 124):
What are the six Ss?
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Value chain
A value chain is a stream of sequential activities that add worth to the final product. The range of activities conducted should provide a product or service that the customer finds useful. These activities can include design, production, marketing, servicing or distribution. A value chain allows a business to identify each steps throughout the productions process. Each step within the value chain is meant to enhance the product or service, which is how the overall “chain” is created.
An example given in the book for eliminating steps is Ryanair airlines. They do not provide certain amenities that other flights do which allows them to in turn cut costs for purchasing food, paying for inventory or staff passing out and cleaning up messes, or even giving away blankets and pillows. This allows airlines to lower their flight costs and gives them an advantage over their competitors for those that do not mind loosing amenities. Another is how Panasonic does not care to be the leader in new and innovative technologies like their competitor Sony. Instead they follow suit when Sony comes out with new rising technologies which cuts the advertisement costs for Panasonic. This also allows them the safeguard of seeing a launch and determining whether the new technology is worth while to spend on.
Value chain is important to corporate strategy since it allows companies to determine which steps are crucial, which need improvement or which need/can be eliminated. Results from evaluating the process allow the product to be made more efficiently which in turn allows customer to purchase a higher quality product at a lower cost. Value chains help companies to save money where it makes sense which overall helps them increase their profit, which in business is never a bad thing.
Dyer, J., Godfrey, P., Jensen, R. & Bryce, D. (2016). Strategic management: concepts and tools for creating real world strategy. Hoboken, NJ: John Wiley & Sons, Inc.
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Relative Cost
When looking at the key term relative cost and basing my thoughts off the example being used in the textbook of General Motors I think back to the company I work for. We are a large oilfield services provider and we compete globally against other companies. There is a constant need for use to review our costs such as sourcing, manufacturing, inventory costs, logistics and so on. All of these tie back into our relative cost to produce and deliver our equipment. One of the areas that comes into play is when we are competing against a foreign firm who can likely produce the end item cheaper than we can based on labor alone. It is very expensive to be a manufacturer on the US. Example is we purchase raw material (steel) from overseas producers. The tariffs that are now in place really take a bite out of our costs that other producers would not have added if they are manufacturing elsewhere. Where we can make up the difference is in volume and our ability to source elsewhere and even produce from other countries. We also have a vast logistics network that can take advantage of more cost friendly shipping lanes. All that said to say that we can still find ourselves out priced on the relative cost on the same type of equipment that a competitor can produce mostly due to regional benefits they can enjoy. Even though we may have a better product the players on the side of the business producing the wells are always look to save their cash.
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