FDA Regulatory Impact on the Value Chain
In his value chain tool, Prof. Porter focuses on the individual firm, and how the firm creates value. In Diagram 1 below, Prof. Porter shows conceptually–
Along the bottom the sequence of steps necessary to produce a product, and
In the rows at the top the overhead necessary for the firm to function.
The specific activities that the company selects to engage in directly determine its profit margin. Certain activities are high-value and produce higher margins, while others not surprisingly are lower. A firm’s competitive advantage derives from its ability to select and execute the most highly value-added functions.
Much more could be said, but let’s move on to look at how FDA regulation impacts the value chain. To convey this impact at a high-level, I’ve drawn the intensity map included as Diagram 2. To understand an intensity map, think National Geographic magazine and a map showing population density through colors. I’ve borrowed that approach here to show the intensity of FDA regulation on each of the different elements of the value chain analysis. This is a bit subjective, so others might disagree. I also made an assumption that the company has a basic ISO 9001 type quality system already.
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