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CH 8 Value Process Framework (VPF)

CH 8 Value Process Framework (VPF). Measure effectiveness of strategy Bring together Value Chain analysis & Five Forces Main elements Value creation Value capture. Value created = Perceived use value – Cost. Perceived use value.

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CH 8 Value Process Framework (VPF)

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  1. CH 8Value Process Framework (VPF) • Measure effectiveness of strategy • Bring together Value Chain analysis & Five Forces • Main elements • Value creation • Value capture

  2. Value created = Perceived use value – Cost

  3. Perceived use value • The price that a customer is prepared to pay for the product if there is a single source of supply • Subjective • Categories for creation of value use: • Quality – functionality, durability, reliability • Speed – how fast a company can deliver a product • Brand – trust, emotional benefit

  4. Exhibit 8.3 Producers completely capture the value created in a (quasi-) monopolistic environment Value capturing Value creation € Price = Willingness to pay Perceived use value Value created Value created Producer surplus = Costs

  5. Cost • Cost of resources – labour, materials, information, capital • Cost of production, marketing, delivery • Selling costs

  6. Value creation: First necessary condition for building competitive advantage Value created must be larger than that of its competitors, imperfectly imitable and substitutable Not sufficient – does not talk about distribution from producers to consumers

  7. Select an industry Be prepared to discuss how at least 5 different companies in that industry create and capture value. - Value drivers- Cost Drivers

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