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Value-Chain Analysis and Customer Needs

            Using value-chain analysis to discover customers' strategic needs.
             Here is a five-step method for discovering a customer's particular strategic needs based on a unique application of value-chain analysis.[1] Performing this analysis on important customers helps identify high-value new business opportunities. It also.
             can strengthen relationships with customers by clarifying their strategic priorities, regardless of whether their needs are based on a differentiation or low-cost strategy or whether that strategy is implicit or explicit.
             Value-chain analysis is used for many purposes, but the process of examining customers' value chains is relatively new.[2] In our five-step process, Step 1 explains how internal and external value chains can be used separately and in related ways. Step 2 shows how to construct a customer's value chain. Step 3 shows how to identify the customer's business strategy by examining this value chain and using other kinds of information. Step 4 explains how to use additional information and intelligence to leverage that understanding into strategic needs and priorities. Finally, Step 5 explains how a firm's marketing function can best use this method of value-chain analysis as a new strategic capability.
             Step 1: An overview of value-chain analysis.
             Value chains may be defined in two ways: (1) within a company they describe the various value-added stages from purchasing materials to distributing, selling, and servicing the final product (Porter's 1985 concept),[3] and (2) they also delineate the value-added stages from raw material to end-user as a product is manufactured and distributed, with each stage representing an industry.[4] For convenience, we will refer to these two definitions as ˜ ˜internal'' and ˜ ˜external'' value chains, respectively.
             The internal value chain is a key concept in the field of strategic management that has been thoroughly explored.

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