Posted by: nuleadership | February 13, 2012

Beating the Global Competition with Value Creation

I do struggle a little with my conscious.  Yes, I’ve been called a pretty hard nose professor who pushes his students.  I tell my students I have a low rating on empathy and mercy when it relates to missing my deadlines. 

However, even the meanest Scrooge would have to have compassion for over 15 million unemployed in America.  But—it becomes personal as you hear about your neighbors, co-workers, and family members who have been laid off. 

Financial institutions and other businesses hold on to their record profits for the ultimate use of their money.  Politicians call them job creators which is ironic since businesses primary motives are to make a profit, not give someone a job.

Companies chase emerging markets abroad. According to government estimates, an additional 1.2 million manufacturing jobs will disappear from America by 2018. If in the process a job is made, those are secondary considerations.

Only when business subscript to a business strategy that involves value creation can they hope to sustain profitability. In this paradigm workers are viewed as assets not liabilities.

Yet, many companies build their profitability on this simple equation. Companies seek to reduce their inputs (outsourcing labor, better technologies) to obtain ‘more profits.’ Yet, it’s pretty self-serving with little regard to  customers and employees.

The definition of value depends on the individual. For this discussion, value is defined as the net bundle of benefits the customer derives from a product of service.  Value is defined as the net bundle of benefits the customer derives from a product of service.  Most companies compete on low cost or differentiation strategy to create this value.

In emerging countries where wages are low, it is very difficult for America businesses to compete.  That is why many companies have opted to outsource some of their core functions abroad.  Yet, America’s strength has always been its innovation and creativity.  These attributes are key ingredients for an effective differentiation strategy.

John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, further examined the concept of value as a strategic advantage: “The most appealing approaches to differentiation are those that are hard or expensive for rivals to duplicate.” Therefore, an effective value creation strategy can beat almost any competitor, globally and domestically. 

This reality is due to the fact that the organization is keenly attuned to the needs of their customers. If individuals keep the concepts of value creation in their mindset, they will be able to overcome many of the disruptive changes to come.

How does value creation relate to sustainability for today’s leaders? Discuss your professional experience with value creation. 

© 2012 by Daryl D. Green                                    


 
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  2. Southeast Sports is a company that I have started in the athletic sub-dye market. I’m facing the issue right now of value creation. A firm’s business model is an important locus of innovation and a crucial source of value creation for the firm and its suppliers, partners, and customers (Amit & Zott, 2001). My company is using a business model that is regional in nature. The south has a large population of softball, baseball, basketball, and soccer teams that need uniforms. The reason for such a large market is the fact that the south can play outdoor sports almost year round. I need to make sure that I stay focused on my strategy of being the regions low cost supplier of athletic uniforms and sporting goods, in order to create the value that I am looking for.
    Reference:
    Amit, R., & Zott, C. (2001, July). Value creation in e-business. Retrieved from http://onlinelibrary.wiley.com/doi/10.1002/smj.187/abstract

    • Chris,

      Congrats on your business venture! Ongoing value creation requires a special connection with your market and customers. How have you managed to stay connected?

      Professor Green

  3. Value creation to a new business translates into marketing. For me, the way I am trying to create value is by trying to gain market share within the local market. I am currently involved within the sports community in Knoxville, Maryville, and most of east Tennessee with travel softball. The most important way that I create value is by being with and around my customers. Business Week says that the best companies enjoy high levels of customer retention and are joined at the hip with the people with whom they do business (Fewell, 2008). That is exactly how I am trying to create value for Southeast Sports. Once I gain the trust and confidence of the local market, I have a strategy to expand into the more southern markets through e-commerce and with physical presence in the local markets through sports reps. It is not going to be easy but I am very interested in applying the concepts that I’ve learned in my MBA and also use practicality to run and manage my sports entity.
    Reference:
    Fewell, C. (2008, September). Toda’ys tip connecting with customers. Retrieved from http://www.businessweek.com/smallbiz/tips/archives/2008/08/connecting_with.html

  4. Sustainability can have several meanings to different organizations. A few firms have begun to frame sustainability as a business opportunity, offering avenues for lowering cost and risk, or even growing revenues and market share through innovation (Hart & Milstein, 2003). Our PSP project in this class will ask us to define sustainability, how it affects an industry, and what changes can be made to allow for the industry sustainability. To understand sustainability, managers must understand the competitive nature of their industry along with the rapid spread of globalization. The idea of globalization should be at the forefront of every managers mind. The decisions made in an organization should be made with sustainability in mind.
    Reference:
    Hart, S. L., & Milstein, M. B. (2003). Creating sustainable value. Academy of Management Executive. Retrieved from http://e4sw.org/papers/Hart_Milstein.pdf

  5. In one of my classes last semester we talked about value creation in relation to LMU. We discussed that LMU should put more emphasize on the fact that they are a small school with small class sizes, but you can still get your masters degree. Not many small schools offer as many masters degrees as LMU does, that is our schools value. LMU is a small school yet you can complete your entire collegiate career here. Value creation is a corporation’s raison d’être, the ultimate measure by which it is judged (Hindle, 2008). Although our main attraction may be the med school, there are 1000’s of med-schools in the United States, our measure by judgment should be that we are a small school that offers as many career path’s as a big school. This is something that LMU’s leaders should consider putting in the spotlight more.

  6. Sorry forgot to cite my source

    Source
    Hindle, T. The Economist Guide to Management Ideas and Gurus. London: Profile books.

  7. I believe that an important trait for any leader to possess the ability to create value for his/her organization. There are many different ways that one can do this. It can be either by having knowledge or experience that others do not possess. It could be having the ability to problem solve. It could be having the ability to resolve conflict and make the organization more efficient. Dorothy Tannahill-Moran cites in her article “5 Leadership Qualities You can Develop to Help you get Promoted” that taking the initiative is a trait that firms look for in leaders. This creates value that is not necessarily measurable, but can truly make a difference in an organization. When leaders “take the initiative” this means that they do not have to be told to fix something—they inherently know to do it and get it done.

    Reference:
    Tannahill-Moran, D. (2012). 5 leadership qualities you can develop to help you get promoted. MBA Highway. Retrieved from http://mbahighway.com/2012/02/5-leadership-qualities-you-can-develop-to-help-you-get-promoted/?utm_source=twitterfeed&utm_medium=twitter

  8. By reviewing the corporate culture of the education system is a great opportunity to address the values practiced in our schools and by staff, faculty, and students. School boards set the ethical standards, guidelines, work practices, and rules for staff, faculty, and the students. However, this does not always work well because the board members are not actually involved with the day to day activities that keep the schools performing at their daily routine. (GLO-BUS, 2012).

    Each of the core values are put to the test at area high schools across the country. William Blount High School in Maryville, Tennessee has a goal of making sure the students obtain the knowledge, skills, and lessons that helps to ensure they graduate and become productive citizens in the community and society. The goals of William Blount High School can’t be reached without each of the players; staff, faculty, and students believing in the values that must guide them each day. A majority of the players don’t even recognize that they are part of the bigger picture.

    References:
    GLO-BUS Premium. (2012). GLO-BUS Premium Business Interaction Game. STRATEGY: Core Concepts and analytical Approaches. Chapter 12, pp 220-236. Retrieved at http://www.glo-bus.com/DocViwer/# on April 27, 2012.


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