Increased Value Added Framework
A strategy for competing in fragmented industries
The Increased Value Added Framework provides a strategy for competing in fragmented industries. This framework involves increasing the value added of the business by providing more service with sale, engaging in some final fabrication of the product, or doing subassembly or assembly of components before they are sold to the customer.
- Increase the value added of the business
- Provide more service with sale
- Engage in some final fabrication of the product
- Do subassembly or assembly of components before they are sold to the customer
- Focus on achieving above-average results, rather than seeking dominance
- Analyze the Industry's StructureUnderstand the industry's characteristics, including the number of competitors, bargaining power, and profitability. Identify the causes of fragmentation and the key success factors in the industry.Pro tipUse tools such as the Five Forces Framework to analyze the industry's structureWarningFailure to understand the industry's structure can lead to ineffective strategies
- Identify Opportunities to Increase Value AddedIdentify opportunities to increase the value added of the business, such as providing more service with sale, engaging in some final fabrication of the product, or doing subassembly or assembly of components before they are sold to the customer.Pro tipUse tools such as the Value Chain Framework to identify opportunities to increase value addedWarningFailure to identify opportunities to increase value added can lead to a lack of direction and focus
- Focus on Achieving Above-Average ResultsFocus on achieving above-average results, rather than seeking dominance. This may involve specializing in a particular product or customer segment, or developing a unique value proposition.Pro tipUse tools such as the Focus Strategy Framework to develop a focus strategyWarningFailure to focus on achieving above-average results can lead to a lack of direction and focus
- Be Disciplined in Implementing Strategic ChoicesBe disciplined in implementing strategic choices. This may involve developing a clear and consistent strategy, and avoiding the temptation to deviate from the strategy in response to short-term pressures.Pro tipUse tools such as the Commitment Framework to develop a disciplined approach to strategy implementationWarningFailure to be disciplined in implementing strategic choices can lead to a lack of direction and focus
- Monitor and AdjustMonitor the industry's structure and competitive forces, and adjust the strategy as needed. This may involve continuously gathering market intelligence, and being willing to pivot the strategy in response to changes in the industry.Pro tipUse tools such as the Market Signals Framework to monitor the industry's structure and competitive forcesWarningFailure to monitor and adjust the strategy can lead to a lack of responsiveness to changes in the industry
Metal service centers have successfully implemented an increased value added strategy, which involves providing more service with sale, engaging in some final fabrication of the product, or doing subassembly or assembly of components before they are sold to the customer.
The framework was developed by Michael E. Porter, a renowned business strategist. Porter recognized that fragmented industries pose unique challenges for businesses, and that traditional strategies may not be effective in these environments. He developed the Increased Value Added Framework to provide businesses with a structured approach to competing in fragmented industries.