Once the value chain is defined, a cost analysis can be performed by assessing the costs of the value chain activities.
The cost obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activity.
Porter identified 10 cost drivers realting to the value chain activities: A firm develops a cost advantage by controlling these drivers better than do the competition.
A cost advantage also can be pursued by reconfiguring the value chain.
Is very important to have a good communication, and teamwork between suppliers at one end, and the customer at the other end of the value chain.
(Wright and Race 2004) A firm maybe create a cost advantage either by reducing the cost of individual value chain activities, or by reconfiguring the value chain.In the service industry and especially in the hotel industry, the value is added and created from the people inputs of time, knowledge, equipments and systems to serve the hotel guests and customers.Customers in these companies can be also employees from the same organisation.The value chain highlights the importance of the operational manager being involved in all aspects of the process, from suppliers right trough the customer.With the value chain approach functional boundaries are ignored and in many organisations its now accepted that the operations manager has to control the whole process from buying in goods and services to the final stage of satisfying the customer.A differentiation advantage may be achieved by changing individual value chan activities to increase uniqueness in the final product, or by reconfiguring the value chain.Porter identified several drivers of uniqueness: Most of these also serve a cost drivers.It is in these activities that a firm has the opportunity to generate superior value.A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation”.( A differentiation advantage can arise from any part of the value chain.For example procurements of inputs that are unique and widely available for competitors can create differentiation, as can distributor channels that offers high service levels.