Porter’s Five Forces for Value Chain Management

Discuss about the Critical Reflection for Managing a Value Chain.

Value chain management is the one of the most important tools for a business as this cover all the processes from the raw materials required for the manufacturing to the final stage before going to the customer (Holweg and Helo 2014). However, the concept requires a master act from the management for the implementation of everything on at the most appropriate places. Being the manager of my organization, I realized that something has gone wrong as I did not execute the operations of value chain processes appropriately. Moreover, several group discussions, my individual assessment and workshop discussions have helped me understand that where did I go wrong with the execution of the value chain operation in my organization. Nevertheless, the example of Starbucks on their value chain management has also helped me immensely in knowing the correct way to go with the value chain operations (Starbucks Coffee Company, 2017).

To manage a value chain, there is an established way, which was laid by Porter in his book “Competitive Advantage: Creating and Sustaining Superior Performance” (E. Dobbs 2014). Porter narrated in his book that there are five driving forces behind the execution of a value chain such as Inbound & Outbound logistics, Operations, Marketing & sales and Customer Service (Tanwar 2013). Inbound logistics refer to all the process required to get the raw material for the Company whereas the outbound logistics refer to every process responsible in supplying the final product for the sale. Marketing & Sales are the two most important part of Porter’s value chain management. Nevertheless, the customer service is the final stage, which takes care of the maintenance part of the product after it has been made available to the customers (Dälken 2014).

Being the manager, I had the responsibility to take care of all the operations. However, it does not mean that I was handling all the process, it rather mean that I kept a strong observation on all the operations. With few discussions at the workplace and the meeting with different supervisors, I came to know that our organization is not performing up to the anticipated level (Theyel 2013). I gathered all the necessary information from my colleagues on the findings of the real cause behind the lower than the anticipated performance. Moreover, feedbacks from customers on product that are easily available on our website have helped in knowing the exact reason behind the lower success. Further, the inbound logistics operations are the main point to look for to achieve the anticipated success level (Cattaneo, 2013). Because of low financial support from the management, I could not proceed with the same way as implemented by Starbucks in their operations. Moreover, it resulted in an average quality in the production of coffee, which indeed resulted in a lesser business success for the Company. Nevertheless, outsourcing the procurement to produce a cheaper product has resulted in reduced performance of my Company.

Importance of Inbound Logistics and Distribution Centers

Outsourcing the procurement to some other companies for the storage of collected raw materials had affected the quality of our production (Gereffi and Fernandez-Stark 2016). Further, at the point of inception, I had never realized that this is going to affect that badly. The negative responses have compelled me in finding out the loophole in the operation and then only, I started finding out the best possible solution to overcome the losses. However, the solution, which could help my organization in resurrecting the business by producing quality product, is derived from the footsteps of some of the leading companies such as the Starbucks (Fearne, Garcia Martinez and Dent 2012). Starbucks ensure no outsourcing of their procurement to maintain a top quality standard in their coffee beans. It has its own distribution centres, which ensures a quality operation before going to the customer. Nevertheless, the beans that are used for the manufacturing of coffee are directly procured from the Farms. The procurement of beans, which is one of the most important parts of a value chain, is governed directly by the Starbucks (Kaplinsky 2013). This is one thing, which has ensured a quality production from the Starbucks Company. Nevertheless, the unprecedented success of the Company has so far produced a good GDP growth per annum in the United States, which has indeed attracted a handy support to the Starbucks from the national government of the United States. Moreover, Starbucks have capable resources with them, which have helped them in their operation and quality production of coffee (Starbucks Coffee Company, 2017).

Although, I have learned a lot from several discussion at the workplace and the business operation of Starbucks but still it is difficult for me to implement the same operation of inbound logistics. Moreover, the launch of the product was done based on some effective strategies but it lacked the touch of Starbucks at that time (Parrilli, Nadvi and Yeung 2013). It was of the utmost requirement for me to follow the guidelines of some of the top companies but I just could not because of the financial status of my organization. The set up of our own distribution centre was not possible at the time of inception of the product in the market. If the implementation of the inbound logistics were on the line of Starbucks, it would have produced a completely different result than the present (Holweg and Helo 2014). However, I just thought that outsourcing the procurement would lower down the burden from the management by saving a significant financial expenditure, which could have asked for in manufacturing of our own storage centre. Moreover, the outsource companies have their own principles, which they cannot change for any of their business partners (Banga 2013).

Challenges in Implementing Successful Value Chain Management

I can never guarantee of incepting the same business line in my organization as it was done in the Starbucks in the United States. Moreover, I would not be equally successful in implementing the same business line in my organization because of financial losses, which my organization is facing. Further, stopping the outsourcing of procurement to maintain the utmost quality in the product requires some changes in the management structure (Qian, Agarwal and Hoetker 2012). Moreover, creating such a work force, which could help in the procurement of raw materials, would attract a healthy investment. Moreover, it does not look feasible with the current financial status of my organization. Further, there is a requirement to have our own distribution centres to maintain a high quality packaging to give our product the best hygienic touch. Nevertheless, the set up of our own distribution centres across the country would require various legal adherences (Miller and Mork 2013). Nevertheless, the legal proceedings for those companies that have successful business are lesser challenging than those, which are struggling with their business. The legal proceedings and the government beliefs would go for those companies that have already proved their worth for the country. Nevertheless, the national government wish to provide support to those companies, which could prove their worth in improving the economy of the country by achieving increasing GDP with every passage of year. Moreover, the availability of required lands for the set up of our own distribution centres would face a severe challenge from the national government (Marchi, Maria and Micelli 2013).

Managing a value chain require various work forces that act as a supportive forces behind its operations. Moreover, Porter has already proposed the way to manage a value chain in his book “Competitive Advantage: Creating and Sustaining Superior Performance”. These five forces are Inbound & Outbound logistics, Marketing & Sales and Customer Service. Nevertheless, these five forces have their own importance, which require separate operations for all this. Moreover, the inbound logistics is the one such force, which plays its important role in producing a quality product. Moreover, the inbound logistics itself depend on certain factors such as distribution centres. Distribution centres are very important for a good business performance as these are the final body before the product launch. Moreover, having the owned distribution centres would guarantee of the quality care given to the product before it is made available to the customers. However, owning a distribution centre would attract a healthy investment, which would put additional pressure on the financial department of the Company. In addition to this, it would also attract certain government guidelines, which would oppose the processing. Nevertheless, owning a distribution centre require the both such as a huge investment and the national government permission. Moreover, these proceedings happen easier in case of top companies, which is rather difficult for companies that have struggled with its GDP per annum. I have faced the similar problem with my organization and that has contributed significantly in the business loss of my organization. Nevertheless, the insufficient financial resource of our Company and the less support from the national government has all stopped me in going with the business line of the Starbucks. Moreover, the Starbucks have their own distribution centres and they never outsourced their procurement, which are all such important things that are working in favour of the Starbucks Company. To follow the business line of a successful company, the utmost support of the national government and the availability of sufficient financial support in the Company do play a decisive role.

References

Banga, R., 2013, December. Measuring value in global value chains. In Regional Value Chains Background Paper No. RVC-8, United Nations Conference on Trade and Development, Geneva. https://unctad. org/en/PublicationsLibrary/ecidc2013misc1_bp8. pdf.

Cattaneo, O., Gereffi, G., Miroudot, S. and Taglioni, D., 2013. Joining, upgrading and being competitive in global value chains: a strategic framework.

Dälken, F., 2014. Are porter’s five competitive forces still applicable? a critical examination concerning the relevance for today’s business (Bachelor’s thesis, University of Twente).

Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Fearne, A., Garcia Martinez, M. and Dent, B., 2012. Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), pp.575-581.

Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer.

Holweg, M. and Helo, P., 2014. Defining value chain architectures: Linking strategic value creation to operational supply chain design. International Journal of Production Economics, 147, pp.230-238.

Kaplinsky, R., 2013. Global Value Chains: Where They Came From, Where They Are Going and Why This Is Important. Innovation, Knowledge, Development Working Papers, (68).

Marchi, V.D., Maria, E.D. and Micelli, S., 2013. Environmental strategies, upgrading and competitive advantage in global value chains. Business strategy and the environment, 22(1), pp.62-72.

Miller, H.G. and Mork, P., 2013. From data to decisions: a value chain for big data. IT Professional, 15(1), pp.57-59.

Parrilli, M.D., Nadvi, K. and Yeung, H.W.C., 2013. Local and regional development in global value chains, production networks and innovation networks: A comparative review and the challenges for future research. European Planning Studies, 21(7), pp.967-988.

Qian, L., Agarwal, R. and Hoetker, G., 2012. Configuration of value chain activities: the effect of pre-entry capabilities, transaction hazards, and industry evolution on decisions to internalize. Organization Science, 23(5), pp.1330-1349.

Starbucks Coffee Company. (2017). Company Information. [online] Available at: https://www.starbucks.com/about-us/company-information [Accessed 5 Feb. 2017].

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of Business and Management, 15(1), pp.11-17.

Theyel, N., 2013. Extending open innovation throughout the value chain by small and medium-sized manufacturers. International Small Business Journal, 31(3), pp.256-274.