Question

1.Explain the concept of “fit” in terms of a company’s value chain? What is it? Why is it important? What course concepts does fit bring together in the value chain?

2.

Why do capabilities that involve multiple value chain elements provide a more durable advantage than a capability from just one part of the value chain?

Answer 1

1. “Fit” in terms of a company’s value chain refers to the manner in which different activities in the value chain interact and reinforce one another so as to create a fit or a balance among a company’s activities. ‘Fit’ is important because it enables activities to reinforce each other and thus it becomes really difficult for competitors to imitate the company’s activities. This leads to long term and sustainable competitive advantage for the company. All elements in a value chain are linked as well as interdependent. “Fit” ensures that all elements are combined effectively and this ensures uniqueness and amplified trade-offs. It also helps in reinforcing a company’s strategic position.

2. Capabilities that involve multiple value chain elements are able to leverage what is different (i.e. the elements) to be more different. The different elements mutually reinforce each other. This is not possible in cases of capabilities from just one part of the value chain. Take the example of Wal-Mart. The company has capabilities that involve multiple value chain elements and this enables it to keep its costs low. The company is, through its multiple value chain elements, able to evaluate suppliers and integrate in-store (i.e. brick and mortar model) and online shopping model’s experiences. This helps Wal-Mart to not only innovate but also differentiate.