Competitiveness and Value Creation

by Edgar Arias, Post-doctoral Research Associate.

In order to move and organization from its current state to a new stronger one, business strategies need to be formulated to improve the organization’s competitiveness (Feurer & Chaharbaghi, 1994). The capabilities and competences that an organization possess to persuade a customer to prefer its products and services over the competition are the essence of competitiveness.  To understand these capabilities and competencies, and their potential to deliver competitive advantage, the organization cannot be seen as a whole.  Instead, it needs to be regarded as a collection of discrete activities, which are performed in alignment with the organization’s business strategies. Value chain is a tool designed by Porter (Porter, 1985) to systematically divide a firm into its “strategically relevant” activities, analyze their behavior and interaction, and determine their importance in the implementation of business strategies. The term value is utilized in this context to denote the potential of these activities to deliver the firm’s value proposition (Kaplan & Norton, 2000). In Porter’s model, depicted in Figure 0, the value chain activities can be divided in two categories: primary activities and support activities.  The primary activities are those related to the physical creation and delivery of the product to the customer, whereas support activities are involved in the procurement and management of the resources needed by the primary activities to operate.

Figure. The Generic Value Chain
Figure. The Generic Value Chain

According to this model, value is created by operating a firm in such a way that the end product or service, has built-in features, for which the customers are willing to pay a price. Bowman et al. argue that value may actually take two forms: the exchange value, which corresponds to the model just explained; and the perceived value, which is subjectively determined by the customer (Bowman & Ambrosini, 2000).  Under this paradigm, the value of the characteristics of products and services, varies from one context to another (e.g. by region or stage in the product life cycle).  This variability in the value of a product or service, is addressed by Hill in his order winner/order qualifier framework (Hill, 2000).  In accord with Hill’s model, which was originated in the field of manufacturing theory (Hofmann, Beck, Füger, & SpringerLink, 2013), the order qualifiers represent aspects of a product or service required for a customer to consider buying it.  The order winners on the other hand, consist in characteristics that position the product or service above those of the competition.  Understanding the difference between these two concepts, and how they materialize in any given industry, is critical for an organization’s strategic planning process.  Therefore, understanding such aspects of the hardwood export business is one of the main themes of this teams’ research projects.

The concepts presented up to this point – value chain, order winners and qualifiers, are based on the assumption that attaining competitive advantage depends on the organization’s resources, value activities, on the characteristics of products and services, and how these are valued by customers.  However, previous research on international marketing also suggests that, the context in which the firms operate, both locally and internationally, along with the characteristics of the organization themselves, play a key role in its competitiveness.  This field of study has coined the term “export performance” to address the factors that determine the success of a firm in achieving its objectives in international markets.  A future note on this subject will address the research conducted by the SIM team on the forest products industry.


  • Bowman, Cliff, & Ambrosini, Veronique. (2000). Value Creation versus Value Capture: Towards a Coherent Definition of Value in Strategy. British Journal of Management, 11(1), 1-15.
  • Feurer, Rainer, & Chaharbaghi, Kazem. (1994). Defining Competitiveness: a Holistic Approach. Management Decision, 32(2), 49-58.
  • Hill, Terry. (2000). Manufacturing Strategy: Text and Cases. Boston, Mass: Irwin/McGraw-Hill.
  • Hofmann, Erik, Beck, Patrick, Füger, Erik, & SpringerLink. (2013). The Supply Chain Differentiation Guide: A Roadmap to Operational Excellence. Berlin, Heidelberg: Springer Berlin Heidelberg.
  • Kaplan, R. S., & Norton, D. P. (2000). Having Trouble with your Strategy? Then Map It (Vol. 78, pp. 167-167). United States: Harvard Business School Publishing Corportation.
  • Porter, Michael E. (1985). Competitive advantage: creating and sustaining superior performance (pp. 33-61). New York: Free Press.