What is Value Chain Analysis Value chain coordinated

What is Value Chain Analysis? Value chain coordinated series or sequence of functional activities necessary to transform inputs into finished goods or services customers value and want to buy

Functional Activities and the Value Chain 9 -2

Functional Strategies and Value. Chain Management Value-chain management development of a set of functional-level strategies that support a company’s businesslevel strategy and strengthen its competitive advantage 9 -3

Functional Strategies and Value. Chain Management Product development engineering and scientific research activities involved in innovating new or improved products that add value to a product Marketing function’s task is to persuade customers a product meets their needs and convince them to buy it 9 -4

Functional Strategies and Value. Chain Management Materials management function controls the movement of physical materials from the procurement of inputs through production and into distribution and delivery to the customer 9 -5

Functional Strategies and Value. Chain Management Production function responsible for the creation, assembly or provision of a good or service, for transforming inputs into outputs Sales function plays a crucial role in locating customers and then informing and persuading them to buy the company’s products 9 -6

Functional Strategies and Value. Chain Management Customer service function provides after sales service and support Can create a perception of superior value by solving customer problems and supporting customers 9 -7

Value-Chain Analysis Value-chain analysis a strategic analysis of an organization that uses value creating activities. Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue 3 -8

Value-Chain Analysis Primary activities contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale. inbound logistics, operations, outbound logistics, marketing and sales, and service 3 -9

QUESTION In assessing its primary activities, an airline would examine: A. Employee training programs B. Baggage handling C. Criteria for lease versus purchase decisions D. The effectiveness of its lobbying activities 3 -10

Value-Chain Analysis Support activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities procurement, technology development, human resource management, and general administration. 3 -11

The Value Chain Exhibit 3. 1 3 -12

Primary Activity: Inbound Logistics Associated with receiving, storing and distributing inputs to the product Location of distribution facilities Warehouse layout and designs 3 -13

Primary Activity: Operations Associated with transforming inputs into the final product form Efficient plant operations Incorporation of appropriate process technology Efficient plant layout and workflow design 3 -14

Primary Activity: Outbound Logistics Associated with collecting, storing, and distributing the product or service to buyers Effective shipping processes to provide quick delivery and minimize damages Shipping of goods in large lot sizes to minimize transportation costs. 3 -15

Primary Activity: Marketing and Sales Associated with purchases of products and services by end users and the inducements used to get them to make purchases Innovative approaches to promotion and advertising Proper identification of customer segments and needs 3 -16

Primary Activity: Service Associated with providing service to enhance or maintain the value of the product Quick response to customer needs and emergencies Quality of service personnel and ongoing training 3 -17

Support Activity: Procurement Function of purchasing inputs used in the firm’s value chain Procurement of raw material inputs Development of collaborative “win-win” relationships with suppliers Analysis and selection of alternate sources of inputs to minimize dependence on one supplier 3 -18

Support Activity: Human Resource Management Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel Effective recruiting, development, and retention mechanisms for employees Quality relations with trade unions Reward and incentive programs to motivate all employees 3 -19

Support Activity: Technology Development Related to a wide range of activities and those embodied in processes and equipment and the product itself Effective R&D activities for process and product initiatives Positive collaborative relationships between R&D and other departments Excellent professional qualifications of personnel 3 -20

Support Activity: General Administration Typically supports the entire value chain and not individual activities Effective planning systems Excellent relationships with diverse stakeholder groups Effective information technology to integrate value-creating activities 3 -21