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Buying one brand of shampoo instead of another, for instance, is quite common. Rivalry, therefore, is high.
Porter's value chain
Porter shows how firms such as Procter & Gamble can create competitive advantages for themselves. He categorizes a company's activities in the following way:
1. Primary activities: (a) Inbound logistics -- receiving the incoming material, including the handling and inventory of their material; (2) operations -- P&G's suppliers forming this material into their products; (3) Outbound logistics -- getting their products on their shelves and to the shelves of the different private stores and from thence to the customers; (5) marketing and sales -- P&G doing research on customer needs, satisfying their needs, communicating with consumers; (6) service -- fulfilling customers' needs after service has been completed, following up, and occasionally replacing products if need be. Research too is ongoing in order to discover future trends and ways to best satisfy and meet consumers'...
Support activities: (a) Firm infrastructure -- the management, finance, legal and other aspects of Procter & Gamble's day-by-day running; (b) human resource management- that they employ to help mechanisms of their business; (c) technology department - to network and communicate with other branches and competitive businesses as well as to reach out to customers and effectively manage their business accounts and reports amongst other purposes; (d) procurement -- purchasing the raw materials and resources.
There are linkages among activities, and results / actions in one department affect mechanism in another. For instance, poor human resource management would affect quality of employees and hence cause consumer dissatisfaction. The value chain is inextricably linked.
References
Quick MBA. The Value Chain. Strategic management www.quickmba.com/strategy/value-chain
Quick MBA. Porter's Five Forces. Strategic management www.quickmba.com/strategy/porter.shtml
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