Value Chain Analysis – Basic Element Of An Organization’s Competitive Advantage

Competitive advantage is a difference in relative prices or the relative costs and it results from differences in their work done. These differences may occur in two different ways, namely either the organization performs better the same types of activities, or it chooses different types of activities. To establish whether between an organization and other competitors in the same industry there are differences in terms of relative prices and relative costs, it is recommended to make use of Porter's value chain, the more so as these differences are determined by the activities of the organization. Value chain plays an important role in the diagnosis of an organization's competitive advantage because through it we can get an insight into the mode of action of costs and the influences they have on the strategy that the organization has taken. Also, through the value chain there can be identified the potential sources of differentiation of products or services offered by the organization.