Value chain and globalization Essay
Value chain and globalization
The process of corporate life is always a sea change and sometimes there are high tides and sometimes are quiet times. Day to day companies are faced with new challenges, whether it be a consolidated organization or a small business just starting, always emerging issues that affect their behavior and their performance. Owing to the consequences of an impressive development of technology and globalization that we are living in this age. Nowadays are faster changes, new challenges threaten seriously survival of organizations, new foreign competitors, mobilization of capitals, difficulties in retaining human capital and changing technologies are elements that require managers to be prepared for change and have ability to motivate employees in order to have continuous renewal. “Micro and small enterprise dominated industries have been both threatened and provided with advantages as a result of dynamic trends related to globalization” (Kula et al., 2006). Value chain is not only to implement new management models that ultimately prove to be only uncertain.
However, management of change consists of take advantage of changes in business environment for the interest of the organization. That is why companies should not only be flexible, but also managers should develop a keen sense to anticipate change; therefore companies will be able to achieve to be at the forefront. According to Porter (1998) “Activities provide the bridge between strategy and implementation. When strategy was defined in terms of broad positioning concepts, a clear separation between strategy and structure was meaningful and useful.” Innovation is everywhere and organizations that are not renewed will hardly be able to survive. Firstly, it should be noted that the purpose of this essay is that I want to explain what is the value chain, its impact to the companies and the impact of globalization to the value chain. Afterwards, I will explain the following seven major issues have had significant impact of globalization on the value chain.
History of the value chain and consisting
First of all, the value chain is a theoretical model to describe the development of the activities of a business generating value to the final customer. The value chain was described by Michael Porter. He defines the value as the sum of the perceived benefits customer receives of low costs to acquire and use product or service “Value is the amount buyers are willing to pay for what a firm provides them. Value is measured by total revenue, a reflection of the price a firm´s product commands exceed the cost involved in creating the product.” (Porter 1998). At the same time value chain is essentially a form of analysis of business through which a company is split up into their constituent parts, and we can seeking to identify sources of advantage. Simultaneously, it is creating the competitive advantage that is achieved when company develops and integrates activities of its value chain less expensive and better differentiated than their competitors.
Therefore value chain of a company is formed by all its added value generating activities and the margins they contribute “Competitive advantage in regard to products and services takes two possible forms. The first is an offering or differentiation advantage. I f customers perceive a product or service as superior, they become more willing to pay a premium price relative to the price they will pay for competing offerings. The second is a relative low-cost advantage, which customers gain when company´s total costs undercut those of its average competitor” (San Miguel, 1996). Sometimes change times in business can generate fear, but beyond fear, managers must generate within their companies the ability to bring about change. When it comes to making changes to the companies and this usually means the introduction of new procedures, staff or ways of working that directly affect those around the organization: employees, shareholders, suppliers, customers.
Therefore managers have two options to deal with the changes. The first option is intimidated by the changes and remaining still or the second option is to understand what is going on, develop strategies and implementation to deal with change. “Competitive Advantage provides the architecture for describing and assessing strategy, linking it to company behavior, and understanding the sources of competitive advantage. It provides the foundation needed to go deeper.” (Porter 1998)
According to Kula (2006), Globalization is a process by which people, companies, goods and services, capital and information and ideas are exchanged across international boundaries, is shaping opportunities for growth and poverty reduction in developing countries. In the current context of globalization, the trend toward merging business grows increasingly harder. Therefore, it is very important to cooperation of all employees of organization in a chain and they sharing common vision for business quickly translate into success factors. Where employees are involved to this vision therefore they will be more productive and more collaborative mechanisms bind them to other actors in the chain, the greater the chance of survival and progress towards economic development processes.
Moreover, companies tend to compete with other companies in the same country and in the same way, companies of the same country tend to compete with companies in other countries a cause of globalization. Therefore, competition among global companies are strongly and should possess highest level of professional competence and for this reason heads of companies should know as renew companies every day to produce high return. A good example about this information is the competence between Procter and Gamble and Unilever; both are global companies and both offer similar products. In the case of my country; In Mexico are both companies each one have both have large factories and corporate offices; the number of employees is large and both have many processes to manufacture both products, as well as quality and administrative. CEO´s of each company must be updated on how to improve processes in each part of the business, the should evaluate the process and trying to reduce as many errors and waste in order to offer the best products and the best price cheaper for the end customer.
So also promote more featuring your product compared with the rest of their competition, as to promote values, social responsibility, brand linkage and sometimes prizes and raffles. Another key point, managers of big companies know that linking brand starts when people are young children and this is why, one of their main sector of society are children. Because marketers know that if a child comes to impregnate a brand in in their childhood, they will take for all their life and therefore they will transmit to their offspring in the future. I see this reflected in my case, since I always prefer to drink Coke when I am eating and I never liked Pepsi since my childhood, this is because since my childhood always drank Coca-Cola by the influence of my mother.
To date I still drink coke, this is an example of how a global company that has implemented the value chain in their structural processes relevant their product has made in my life. “For a firm to achieve superior differentiation, it must utilize the best mix of resources in creating value for its customers. In order to prioritize its processes as sources of differentiation, a company must determine what attributes of each process enhance customer value” (San Miguel 1996).
In addition, to doing this research, I could find relevant information about the significant role that is playing the value chain into companies. The purpose of the essay is to provide assessment the role that could be obtained in business when is used the value chain process in the different departments of a company. The administration of change is of great importance, since it allows control of the transformation process. but in most organizations even greater challenge is managing change so that through leadership can attack low productivity, motivate the actions needed to alter behavior in a meaningful way and make the change take root in infusing culture and values of the business. It is of primary importance that business leaders must be updated and catch up on new models and theories about management, change and value chain.
To be able to compete with the variety of existing competitors in business territory. In Conclusion, there is no possibility that organizations can achieve competitive goals, if the people who are not found suitable from the point of view of training and attitudes, to carry on. In essence, organizations today emphasize the ability of leaders to manage their staff. Therefore, people will go to those who can prove they have the will and capacity to meet their needs, enhancing their strengths and improving their skills. Thus man becomes the protagonist of the success of any business strategy.
San Miguel, J, 1996, Value chain analysis for assessing competitive Advantage. Institute of Management Accountants. Canada. Staying competitive in the global economy (2008) Secretary-General of the OECD