value the key to differentiation the central idea in strategy © 2009: james h. biteman, dba
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ValueThe Key to Differentiation The Central Idea in Strategy
© 2009: James H. Biteman, DBA
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What is Value?
Value is what the end consumer pays forValue is what differentiatesValue is created by the activities of the firmValue is co-created by all members of a value chain
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Value Relationship
VALUE
VALUE CHAIN
END CONSUMER
Linked Activities
What the consumer pays to receive
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Which is More Valuable?
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Who Is Your Customer?
If you manufacture women’s clothing, who is your customer?
Label owners?Wholesalers?Large Retailers?
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Who Is She?
Young, Professional, Affluent
Desires fashionAdds to clothes she already hasServed by retail / brand owner (Limited, GAP)
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What is Value?
DifferentBetterExactly what I want
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Value is Different – Examples
Women’s Clothing:In apparel, value is style
Wal*Mart:In mass merchandising, value is certainty
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Wal*Mart’s Customer
Family shoppingDaily use itemsValues convenienceDoes not want uncertainty
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What is Value at Wal*Mart?
Right brands/productsAdequate selectionEverything I needThe best price
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Wal*Mart’s Strategy
Stores are not “interesting”Would introduce uncertaintyStaple items only
Desired brandsAdequate selectionAlways available
Good prices (not the lowest)No specials
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Women’s Clothing
Female professionalAppearance is importantLimited resources / timeAdds to an existing wardrobe
Wants to look rightMay not know if item is right until she seesShops to keep wardrobe “fresh”
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Competing Brands – Customers
Gap, Inc. – “Old Navy”Limited – “The Limited,” “Victoria’s Secret”Abercrombie & Fitch
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Li & Fung – Hong Kong
Value chain coordinatorSourcing agent for brand owner/retailerContracting agent for manufacturer
Builds marginValue of apparel is in style
The right itemAt the right priceIn the right placeAt the right time (no “breakage”)
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What is Value?
Value is what the end consumer pays forValue is what differentiatesValue is created by the activities of the firmValue is co-created by all members of a value chain