Value chain analysis.
Business units can develop competitive advantage based on low cost, differentiation or both. The most attractive competitive position is to achieve cost-cum-differentiation.
Providing better customer value for an equivalent cost or equivalent customer value for a lower cost.
Value chain analysis seeks to determine where in the company's operations (product development -> manufacturing -> marketing and sales -> service / logistics) customer value can be enhanced or costs lowered.
For each value-added activity, the key questions are:
1. Can we reduce cost in this activity, holding value constant?
2. Can we increase value in this activity, holding costs constant?
3. Can we reduce assets in this activitu, holding costs and revenue constant?
4. Most importantly: can we do 1, 2 and 3 simultaneously?