Advantages Of Value Creation

Value creation is a business term. Company create value to facilitate the customers of goods or services and also for the owner of the business to raise profitability. Profitability of a company depends on three factors: (1) the value customers place on the company’s products; (2) the price that a company charges for its products; and (3) the costs of creating those products. When a company raise its products value, it can increase the product price to reflect the value or reduce the price to attract more customers to purchase its products. Components of value creation per unit:

I. Value (Utility) to consumer - V

II. Price - P

III. Cost of production - C

IV. Consumer surplus - (V – P)

V. Profit margin (P-C)

Competitive Advantage is

So, efficiency is important in an organizations value chain.

Building Blocks of Competitive Advantage: I. Superior quality II. Superior efficiency III. Superior customer responsiveness IV. Superior innovation

Internal analysis is a component of the strategic planning process, focuses on reviewing the resources, capabilities, and competencies of a company. An internal analysis help a company to determine the strengths and weaknesses of the company. Example, an internal analysis at Time Inc. revealed that while the company had strong well-known brands such as Fortune, Money, Sports Illustrated, and People (a strength), and strong reporting capabilities (another strength), it suffered from a lack of editorial commitment to online publishing (a weaknesses). To identify strengths and weaknesses effectively, company managers need to be able to compare the performance of their company against that of competitors and the historic performance of the company itself. This will help them determine whether 1. They are more or less profitable 2. Their company strategies are maximizing the value being created 3. Their cost structure is out of line with those of