Put yourself in a customer’s shoes: you are going to buy a digital radio via a typical electronics supplier. There are around 20 different makes on the shelf. How are you going to decide which one you will buy? What is important to you when you make your decision?
One of the primary considerations in your decision process would be the cost. You may have then thought about what each radio can do (the specifications). Perhaps colour, style and design would have suddenly come into the equation. As good logisticians, you would possibly have considered a warranty and availability as well. Having done this recently, I discovered that all the radios were very much the same and that the costs were within a few pounds of each other. So what made me choose the one I did? In my particular case the unique selling point (USP), to me, was the style of the radio, together with the fact that they were on the shelf and I could walk away with it under my arm.
The main point of this exercise is to emphasise that within the market, in almost all areas, there is stiff competition. Each product will be made by some companies and their strategies will all follow similar lines.
Therefore this marketplace is a commodity market, and this is because there is so much choice available that the customer can be selective in their decision. So much of the power has moved via the supplier to the customer. How many times have you heard the terms ‘it’s a buyer’s market’ or ‘the customer is always right’. These terms highlight the shift in time when Henry Ford coined the phrase: ‘you can have it in any colour as long as it is black.’
The implications of this shift are to make every segment of the production chain important with particular reference to the supply chain. This is now seen as the value chain, and every activity is judged by what it adds to the product regarding competitive advantage. The added value offered, in the case of the radio, helped us to choose and purchase the product. Figure 2 illustrates the shift in the Supply Chain.
Figure 2: The Power Shift in the Supply Chain