TY - THES

T1 - Customer Value Chain Analysis in Aggregate Production: A Comparison between two different markets

AU - Hedin, Bo Thomas Krister

N1 - embargoed until null

PY - 2012

Y1 - 2012

N2 - The manager for Product Line Crushers, Construction, Vice President Mr. Mikael Delbrant and the manager of the Process Technology Centre Mr. Per Hedvall are the sponsors for this SIMACS II project. The scope is to “Describe and compare the value chain in aggregate production on different markets” and the objective is to find out if our offering towards the industrial part of the world should be different compared to the emerging world. The value chain analysis was introduced by Porter in his book “The Competitive Advantage”, were he wrote “The ultimate basis for differentiation is a firm and its product‟s role in the buyer´s value chain, which determines buyer needs” (Porter, 1985). “The value chain is a tool to disaggregate a business into strategically relevant activities. This enables identification of the source of competitive advantage by performing these activities more cheaply or better than its competitors” (Brown, cited in Noke, & Hughes 2009:133). This is the reason why it is so important for Sandvik Construction and any other company, who want to survive in a competitive world, to understand our customers‟ value chain. Porter means that the differentiation can be based on either lowering the costs for the customers or improving their productivity (Porter, 1985). Sandvik Construction strategy is to improve our customers‟ productivity. The deliverables and milestones will be to identify the value chain and trends including capital, labor, energy and services and create a reference material for Global Product Line Managers for directing offering development of present product range and identification for new business opportunities. The method of research is a comparative case study of one quarry in Sweden and one in India. A chain is only as strong as the weakest link and all links in the chain is needed. Generally speaking the closer you get to the finished product in a producing company the more strategic it gets. This is supported by the case in India where the early links in the chain is outsourced, but the later like crushing and screening and dispatch is in house activities. So Sandvik are strategically correct placed when offering crushers to aggregate producing companies. Should our offering be different towards customers in the Industrial part of the world compared to customers in the Emerging world? Yes, the value chain has different strengths and weaknesses when you compare the industrial world with the emerging world and these differences motivate a different offering. The recommendations made are in the areas of capital, labor, energy and services. Capital: There are possibilities offering credits and loans to customers in the emerging world having to pay interest around 14.5 %, Sandvik can gain market share by doing this as competitors already are doing it. Combine these offerings with extended warranty programs like Security+, we can also increase our market share in the spare- and wear parts sale, because after implementation of these recommendations, the customers will have higher switch costs and hence have stronger reasons to stay loyal with Sandvik. Labor: There will always be possibilities to offer training to customers and earn profit on it. The advantages are closer contacts with customers and improved customer retention. Energy: Here is the golden opportunity, not only to have energy efficient crushing plants, but also to solve the constant agony with recurrent black outs and the following hard work of emptying the crushers that are full of uncrushed rock. The company that can find a way solve this issue will have a great future in the sales of crushing equipment in the emerging world. Services: Availability of parts and services is important no matter where you are in the world. Make sure you can provide selected customers with the parts and services you have agreed upon.

AB - The manager for Product Line Crushers, Construction, Vice President Mr. Mikael Delbrant and the manager of the Process Technology Centre Mr. Per Hedvall are the sponsors for this SIMACS II project. The scope is to “Describe and compare the value chain in aggregate production on different markets” and the objective is to find out if our offering towards the industrial part of the world should be different compared to the emerging world. The value chain analysis was introduced by Porter in his book “The Competitive Advantage”, were he wrote “The ultimate basis for differentiation is a firm and its product‟s role in the buyer´s value chain, which determines buyer needs” (Porter, 1985). “The value chain is a tool to disaggregate a business into strategically relevant activities. This enables identification of the source of competitive advantage by performing these activities more cheaply or better than its competitors” (Brown, cited in Noke, & Hughes 2009:133). This is the reason why it is so important for Sandvik Construction and any other company, who want to survive in a competitive world, to understand our customers‟ value chain. Porter means that the differentiation can be based on either lowering the costs for the customers or improving their productivity (Porter, 1985). Sandvik Construction strategy is to improve our customers‟ productivity. The deliverables and milestones will be to identify the value chain and trends including capital, labor, energy and services and create a reference material for Global Product Line Managers for directing offering development of present product range and identification for new business opportunities. The method of research is a comparative case study of one quarry in Sweden and one in India. A chain is only as strong as the weakest link and all links in the chain is needed. Generally speaking the closer you get to the finished product in a producing company the more strategic it gets. This is supported by the case in India where the early links in the chain is outsourced, but the later like crushing and screening and dispatch is in house activities. So Sandvik are strategically correct placed when offering crushers to aggregate producing companies. Should our offering be different towards customers in the Industrial part of the world compared to customers in the Emerging world? Yes, the value chain has different strengths and weaknesses when you compare the industrial world with the emerging world and these differences motivate a different offering. The recommendations made are in the areas of capital, labor, energy and services. Capital: There are possibilities offering credits and loans to customers in the emerging world having to pay interest around 14.5 %, Sandvik can gain market share by doing this as competitors already are doing it. Combine these offerings with extended warranty programs like Security+, we can also increase our market share in the spare- and wear parts sale, because after implementation of these recommendations, the customers will have higher switch costs and hence have stronger reasons to stay loyal with Sandvik. Labor: There will always be possibilities to offer training to customers and earn profit on it. The advantages are closer contacts with customers and improved customer retention. Energy: Here is the golden opportunity, not only to have energy efficient crushing plants, but also to solve the constant agony with recurrent black outs and the following hard work of emptying the crushers that are full of uncrushed rock. The company that can find a way solve this issue will have a great future in the sales of crushing equipment in the emerging world. Services: Availability of parts and services is important no matter where you are in the world. Make sure you can provide selected customers with the parts and services you have agreed upon.

M3 - Master's Thesis (University Course)

ER -