We live in an environment which changes often. In the business world, what is in demand today for an organization may not be a requirement for tomorrow. Smart managers know that organizations that succeed do so because they adjust to keep up with the changes that are taking place (Harmon, 2007). Change in business comes in many forms and affects companies in every industry. Business today is one of the dominant institutions in society. Businesses are established with the sole purpose to provide a product or service to a customer with the intent to make a profit. Once established, every company wants to improve the way it does business to produce things more efficiently and to make a greater profit. Every manager understands that achieving these goals are part of his or her job. For the business they must create a strategic vision for long term sustainability. By adopting sustainable practices, companies can gain a competitive edge, increase their market share, and boost shareholder value. This paper will identify as points of discussion the value chain and competitive forces in Porter’s model based on ‘The Mini-cases: 5 companies, 5 strategies, 5 transformations article and cases; and the affects did Information Technology have on the sustainability on those five organizations.
1. Identify the value chain and competitive forces in Porter’s model. Based on “The Mini-cases: 5 companies, 5 strategies, 5 transformations” article and cases. 2. What effect did IT have on the value chain and competitive forces of those organizations? 3. What are some of the changes to the value chain and competitive forces when an organization responds to sustainability?
Value Chain Analysis
Early as 1979, Michael Eugene Porter introduced the concept of the value chain analysis. A value chain analysis allows a firm to understand the parts of its operations that create value and those that do not (Ketchen & Hult, 2007). Understanding these issues is very important because the firm earns above average returns only when the value it creates is greater than the costs incurred to create that value (Porter, 1985). The value chain is a template that a firm uses to understand their cost position and to identify the multiple means that might be used to facilitate implementation of a chosen business-level strategy (Alcancer, 2006). The value chain shows how a product moves from the raw material stage to the final customer. A firm value chain is segmented into primary and support activities. Primary activities involves with a product’s physical creation, its sale and distribution to buyers, and its service after the sale. The primary activities include five generic categories which are comprise in competition in any industry covering inbound logistics, operations, outbound logistics, marketing and sales and services (Porter, 1985). Support activities provide the assistance necessary for the primary activities to take place, which are firm infrastructure, human resource management, technology development, and procurement (Porter, 1985).
Competitive Advantage Concept
From the activities done in a business or in its supply chain, a firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate (Barney & Clark, 2007). As Michael Porter comments, “Strategic fit among many activities is fundamental not only to competitive advantage but also to the sustainability of that advantage. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular sale-force approach, match a process technology, or replicate a set of product features. Positions built on systems of activities are far more sustainable than those built on individual activities” (Porter, 1996). An organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors’ efforts to duplicate its strategy have ceased or failed. Mr. Porter makes the essential point that competitive advantages and the differences they create in firm performance are often
strongly related to the resources firms hold and how they are managed. Resources are the foundation for strategy, and unique bundles of resources generate competitive advantages that lead to wealth creation (Bush, Greene, &Hart, 2001).
Founded by Israeli entrepreneur Shai Agassi in 2007, Better Place developed a system where electric-car owners could drive their vehicles into a network of stations around Israel and replace the car’s battery with a new one in about the same amount of time it takes to fill a gasoline tank on a regular car. The “quick drop” system was supposed to remove one of the main obstacles to the adoption of electric vehicles, namely the several hours it takes to recharge a flat battery (Pearson& Stub, 2013). Better Place use information technology in the value chain model by outsourcing to companies that have integrated the electric car into its policies. Better Place’s business model was based on car owners paying a fee according to the number of miles they drive. The competitive force that influenced the Better Place Company was the demand for the electric car filling stations. It has also positioned itself to be the first to reap the benefits when battery pack recharging facilities and infrastructure are more universally accepted by having proof-of-concept in hand in leading-edge nations.
Senior managers of Nike understanding that disposing of waste in an environmentally-friendly manner is crucial to business sustainment implemented a zero waste policy. While looking into manufacturing, they found it took three shoes worth of material to produce just two- one pair of shoes (Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M., et al. (2009). Previous statistics exhibited that the company was spending over $700 million a year on waste management. The organization could not sustain productivity and made waste management a main priority. From these actions evolved strategic long term goals to eliminate zero toxic materials, closing loop systems, and to sustain growth and stability. In order to deliver a value product and service to its customers and employees, Nike realizes that survival depended on creating a supply chain with several big companies like Dow, BSAF, and DuPont. The value of intangible resources, including knowledge allowed Nike to create capabilities to gain a competitive advantage. Outsourcing played a major role in Nike competitive force. Nike understood that engaging in effective outsourcing increased their flexibility, mitigated risks, and reduce their capital investments. Outsourcing proved to be effective because Dow, BASF, and DuPont possessed the resources and capabilities required for Nike to achieve competitive superiority in all primary and support activities. Under the new design and productions methods, product waste was reduced by up to 67 percent, energy use was cut by 37 percent, and solvent use was slashed by 80 percent (Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M., et al. (2009). Research suggest that few companies can afford to develop internally all the technologies that might lead to competitive advantage. By nurturing a smaller number of capabilities, a firm increases the probability of developing a competitive advantage because it does not become overextended and can fully concentrate on those areas in which it can create value (Linder, 2003).
Rio Tinto a mining company with a large area of operation obtained what it calls a “social license to operate” which supported the organization’s plan to protect the environment and create economic opportunities. The local community was not acceptance of another project that will affect the environment. Over half of the island had already been demolished from farming; grazing and charcoal production. (Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M., et al. (2009). After a decade of operation and a sense of urgency, the company decided to transform in the mining area. In order to gain acceptance of the community, management created a strategy to protect the environment and generate financial opportunities for the employees. The strategy served as a competitive force by building a positive relationship within the community by providing training, employment, protection of raw materials, financial resources, and establishing global polices.
With energy, water usage, wastes, and carbon emission on the decline within most companies, General Electric realized that the growth in population would affect the companies’ sustainability. They say an opportunity to engage and help other companies create goals for sustainment. This was chance for the company to utilize the value chain by providing their assistance and also making a profit. General Electric partnered up with other businesses to make the best decisions about which operation to support and which product to purchase for the future. They jump on the idea of energy conservation first within the company and its employees. Within the company, General Electric began engaging employees to see where energy savings could be found. That might be turning off the lights when a factory was idle, or even installing a switch so that lights could be turned off. They also created projects which involved installing LED lights on a factory floor, recycling water at a nuclear facility, and offering combined heat and power generation units at a plant in Australia (Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M., et al. (2009). These efforts prove to be beneficial for sustainability by saving the company over $100 million dollars.
Wal-Mart, one of the top producing merchant in the world have been trying to progress in zero waste and producing products that will not harm the environment. The technology to concentrate liquid detergent has been available for more than a decade, but was little used due to lack of interest in commercialization. Partnering closely with its suppliers, Wal-Mart made the decision to offer only concentrated detergent, and leading manufacturers began transforming their facilities to accommodate this request, leaving less capacity for old-fashioned detergents with high water content. This encouraged other retailers to move toward selling only the concentrated version of liquid detergents. In 2005, Wal-Mart initiated a partnership with Unilever to dramatically reduce the packaging of its “all®” detergent. Wal-Mart helped bring the product to market by promising equal or greater shelf space despite the smaller product size (Wal-Mart, 2007). This business decision enabled the companies to produce a more powerful detergent, reduce waste and in return use less plastic, cardboard and water. There was a positive impact on Wal-Mart for reducing waste which also affected the landfills (Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M., et al. (2009). As this became the standard for manufacturing companies, Wal-Mart set the bar for their competitive manufactures. The competitive force gave Wal-Mart the leading edge to ensure customer acceptance, promoting the benefits of concentrated detergent and adding value by its their environmental benefits.
Some researchers believe that by moving toward ecological sustainability, business firms gain a competitive advantage. The five organizations listed in the article ‘The Mini-cases: 5 companies, 5 strategies, 5 transformations article and cases” have embraced the idea of being proactive through partnership can confer a competitive advantage by saving money, attracting green customers, promoting innovation, and developing skills. While these organizations implemented strategies for sustainability, information technology affected the value chain and competitive forces by motivating firms to form partnerships as a way to effectively cope with the changes occurring in the market. Through information technology firms gain access to their partners’ other partners. Having access to multiple collaborations increases the likelihood that additional competitive advantages will be formed as the set of shared resources and capabilities expands (Olhager & Rudberg, 2003). In turn, being able to develop new capabilities further stimulates product innovations that are so critical to strategic competitiveness in the global economy (Klienschmidt, Brentani, & Salomo, 2007).
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