For your small business to have a competitive edge, certain fundamentals must be in place to

succeed. Those fundamentals comprise the value chain analysis, a concept developed and advanced by
Michael Porter in his book “Competitive Advantage: Creating and Sustaining Superior Performance.”
Successful value chain management should be part of your small business strategic planning initiative, a
powerful way to help your operation contain costs and succeed in today’s ultra-competitive business
environment.

Research and Development

The first step in value chain management is researching the products your customers want. Through
careful market analysis, including the measurement of consumer trends, companies can anticipate what
people want and have those products available. On the small business level, this could mean working
directly with suppliers to produce a new product.
Product Design
Once a new product has been identified or an existing product upgraded to meet anticipated demand,
that item is tested, refined and sent on for production. In companies where service is the product, the
same planning process is used.
Production Process
Where your product is manufactured can have a significant impact on quality, cost and value. Writing for
Business Process Trends, Andrew Feller, Dr. Dan Shunk and Dr. Tom Callarman note that “...global
sourcing and supply has begun a long-term process of leveling the playing field for adding value world
wide.” More than likely your small business will look overseas to suppliers who can build what your
company needs at a competitive price.
Marketing and Sales
Feller, Shrunk and Callarman noted three components every successful product must offer: product
value, service value and a “wow” value. That latter component goes beyond personal care and warranty
service to provide an enhanced level of service not generally offered. One current example of a company
putting “wow” into practice is the Ritz-Carlton Hotels, whose managers have been empowered to “...to
permit every employee to spend up to $2,000 making any single guest satisfied,” according to the Oct.
30, 2009, issue of "Forbes" magazine.
Distribution Management
Where you warehouse and how you distribute your product is a critical link in the value chain.
Transportation, material handling, packaging, communications and information systems need to be in
place to get the product to your customers. Distribution, or logistics management, remains important in
the digital age, as physical locations such as stores and warehouses are still needed. How you employ
each distribution point is subject to review and change.
Customer Service
Getting the product to your customers means training your employees to know everything about it,
advising customers how to use the product, diagnosing and troubleshooting, and providing friendly
service. This final link in the supply chain is refined as needed and is used by senior management to
gauge customer behavior.