How Can Value Chain Analysis Help Identify a Company's Strengths & Weaknesses?

Whether you operate a spa or provide bookkeeping services to small businesses, your product or service has to create value for your customers. Value may include providing quality products and services and exemplary customer service, in a timely manner, at reasonable prices. You can use value chain analysis to ensure that each business activity you are involved in creates value for your customers and to help identify your company’s strengths and weaknesses.

It is typical for an owner to complete a SWOT analysis when crafting a business plan to identify where the company's strengths, weaknesses, opportunities and threats lie. Companies apply this information to decisions they make about managing, hiring, marketing and financing the business. Strengths reveal areas that help the business differentiate itself from competitors, while weaknesses may show where the business is lacking. Understanding strengths and weaknesses is integral to creating a favorable customer experience for new and existing customers, so it’s no wonder business owners utilize value chain analysis to help identify what they are.

The value chain analysis process begins with examining each of the activities you and your employees do to create a positive experience for your customer. If you operate a coffee shop, some activities might include hosting live poetry nights on Fridays, offering a free add-ins bar stocked with various sugars and creams, hosting weekly “Coffee on Us” events for local businesses and solely using local coffee beans. For clues, pay attention to the feedback your customers provide you with in person, on your blog and through social media sites; examine what they highlight as the reasons they use your products or services. These activities represent your strengths.

Even though the activities you select represent the ones that add value to your customers’ experiences with your company, there is always room for improvement. In the example of the coffeehouse, you may offer local coffee beans, but perhaps you need to expand your selection to give customers more options, or maybe you can offer more add-ins. These improvements expose minor weaknesses you may face if you neglect to make additional improvements. They also help you determine ways you can improve your business by focusing on aspects that are already valuable to your customers.

Making improvements may involve additional resources, such as more money, additional staff or new supplies and equipments. Often, when businesses examine changes they want to make, and begin taking inventory of the resources necessary to make the changes happen, they expose weaknesses. Weaknesses may include lack of qualified staff, lack of suppliers or insufficient marketing funds.