Using the Value Chain to Create Competitive Advantage

A value chain is a depiction of the value activities that are linked together to create, distribute, and maintain products and services (R. Schultheis and M. Sumner). The value chain is divided into primary and support activities. Inbound logistics, operations, outbound logistics, marketing, and service make up the primary activities. While on the other hand support activities include all the resources that support the primary activities like the organization, human resources, technologies and purchasing.

Most firms are realizing the importance of Information Technology (IT) in ensuring that they obtain a competitive edge over their competitors and a company like Spar supermarket is not an exception. Through the use of barcode scanners Spar is able to ensure that data entry errors are minimal and that the process of data capturing is fast. The store is widely known for selling fresh quality products to its customers. This is made possible by the fact that the store has got its own database of all card carrying members where they record personal details about each buyer. With this, the store is able to obtain timely information about buying trends hence allowing it to aid in the ordering process.

Armed with such information, the purchasing department is able to order more of in-demand goods while reducing the quantity of those products less demanded by customers. This also helps the advertising department as it is able to the information to promote the products and services. For instance, card members are notified via e-mails if a new product is to be introduced and if there would be a sale. Sometimes the store sends personal messages to customers during their birthdays and this helps to strengthen the bond between the store and its customers. As a result, the customers remain loyal to spar and through the use of their cards, they are able to get discounts as well as buy on credit.

The supermarkets also use inventory control systems to manage their stock and this allows it to have a competitive edge against those competitors who do not use such. These are tools that automate the process of tracking inventory. They work in real-time using wireless technology to transmit information to a central computer system as a transaction occurs. Since Spar is a large store, it risks the possibility of running out of stock and so with this system, the store is able to minimize that risk. During stock-taking, employees do not have to count the stock manually but instead use automated devices. Human errors are minimized and also the number of employees needed for stock-taking is reduced which enable the store to cut costs. Moreover, this helps to track theft of retail merchandise, providing valuable information about store profits and the need for theft prevention.

Inbound Logistics
Spar can also create competitive advantage through the use of Electronic Data Interchange (EDI) systems. These are bilateral information systems that allow two organizations to exchange information electronically. The store can link with its database with that of its suppliers to exchange purchase and sales information electronically. This will eliminate the amount of paperwork and procedures such as purchase orders and sales receipts.
In this system, Spar’s supplier’s computer system monitors Spar’s computerized database to determine when inventory levels of a product need replenishing. When this level occurs, the supplier’s computer system initiates a purchase order process within Spar’s computer system. Electronic data interchange handles purchase orders, payments, inventory, and account updates automatically between the two computer systems. This system will benefit the supermarket in terms of reduction in costs of managing stock, the firm’s business process will be fast, more efficient and less costly. These cost savings will be shared by the customers through lower prices thus giving Spar a competitive edge over competitors.

Marketing and sales
The store has created a link on Facebook where customers can post their comments about the products and services offered. This helps in analyzing customer demands and assist in determining inventory requirements for customers. Customers can also log in to the Spar website to find information about the store and its products making it easier for them to decide on which items to buy.

In addition to supporting the primary activities, information technology can also support the secondary activities of Spar supermarket.
Management Communications
The store can have a corporate wide electronic mail system to facilitate interaction among all levels of the management structure and create a more flexible, dynamic organization. This system would ensure that managers give employees timely feedback about project-related activities. Employees can also supply feedback to help their managers diagnose problems and reallocate resources more effectively.

Human Resources
Spar must ensure that they hire staff that is skilled in Information technology that will be able to manage an online personnel information system with a skills database. This skills database will enable management to identify employees skills needed for particular assignments on a timely basis.

Challenges Spar Has to overcome when using IT
Inability of suppliers to implement information technology; some suppliers may not have the financial muscle to enable them to afford the required infrastructure because of their size. This would water down the store’s efforts to link with them electronically.
Lack of Management support; Top management in an organization plays a vital in setting the tone and ensuring success of any activity. They are the one who must motivate subordinates to do their work. The key to success therefore is not only implementing Information technology but also in the ability of top management to use it to create competitive advantage.
Failure to identify the processes to be affected; Some organizations have invested huge sums of money in IT but are yet to realize any benefits of those investments. This is because they omit the processes which would allow them to gain competitive advantage. Often this is a result of poor planning on the organization’s part.
Lack of Resources; Funds are the driving force behind a firm’s ability to implement information technology. If funds are not available, it is impossible for a company to invest in IT so as to create competitive advantage. For Spar to be able to use IT in order to have a competitive edge over its competitors, funds must be available. The best thing to do as a company is to have a budget for IT each year and set up an IT department which will be involved in research and development.

Summary and Conclusions
For a firm to have competitive advantage, it must differentiate itself from its competitors by either product differentiation and or low cost leadership. Low cost leadership refers to the ability to reduce costs or improve productivity without incurring additional costs. IT as a tool does not facilitate competitive advantage but management utilize it to achieve competitive advantage.

Information Technology can help support firms’ operations by creating value and achieving differentiation through product deliverance. By innovating business processes IT affects the organization’s bottom line costs thus assist in gaining cost advantage over it rivals. However, it is important for an organization to understand its value system so as to identify the processes involved and then try to incorporate IT to support to support business strategy. IT can be integrated at any level of the value chain of the chain of the organization to help it succeed in outsmarting its competitors.
To sum up, for an organization to have a competitive edge over its competitors, it is vital to have an IT department which will be involved in research and development. This will ensure that the company is always on top and stays there for a long time. Planning is very important to avoid wasting funds on systems that will soon become obsolete without yielding any benefits to the organization.