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    Chain: Michael Porter's Value Chain Analysis

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    lakshay chawla
    Michael Porter's Value Chain Analysis examines how a business creates value for customers through its activities. It views a business as a series of activities that transform inputs into outputs. There are primary activities like operations and marketing that directly involve creating and distributing the product. There are also support activities like procurement and human resources that help enable the primary activities. Conducting a value chain analysis involves identifying a firm's discrete activities, attaching costs, and determining which activities are most critical for customer satisfaction and competitive advantage.

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    Chain: Michael Porter's Value Chain Analysis

    Uploaded by

    lakshay chawla
    47 views2 pages
    Michael Porter's Value Chain Analysis examines how a business creates value for customers through its activities. It views a business as a series of activities that transform inputs into outputs. There are primary activities like operations and marketing that directly involve creating and distributing the product. There are also support activities like procurement and human resources that help enable the primary activities. Conducting a value chain analysis involves identifying a firm's discrete activities, attaching costs, and determining which activities are most critical for customer satisfaction and competitive advantage.

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    Value chain analysis

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    Michael Porter's Value Chain Analysis examines how a business creates value for customers through its activities. It views a business as a series of activities that transform inputs into outputs. There are primary activities like operations and marketing that directly involve creating and distributing the product. There are also support activities like procurement and human resources that help enable the primary activities. Conducting a value chain analysis involves identifying a firm's discrete activities, attaching costs, and determining which activities are most critical for customer satisfaction and competitive advantage.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    47 views2 pages

    Chain: Michael Porter's Value Chain Analysis

    Uploaded by

    lakshay chawla
    Michael Porter's Value Chain Analysis examines how a business creates value for customers through its activities. It views a business as a series of activities that transform inputs into outputs. There are primary activities like operations and marketing that directly involve creating and distributing the product. There are also support activities like procurement and human resources that help enable the primary activities. Conducting a value chain analysis involves identifying a firm's discrete activities, attaching costs, and determining which activities are most critical for customer satisfaction and competitive advantage.

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    • Michael Porter's Value Chain Analysis

    0
    Q The tenn value chain describes a way of looking at a business as a chain of activities
    that transfonn inputs into outputs that customers value. ·
    Q Customer value derives from three basic sources:
    Q activities that differentiate the product
    Q activities that lower its cost
    Q activities that meet the customer's need quickly.
    Q Va~u~. chain analysis views the organization as a sequential process of value-creating
    act1v1ties, and attempts to understand how a business creates customer value by
    examining the contributions of different activities within the business to that value.
    • Value Chain Analysis
    Q Porter describes two different categories of activities:
    Q Primary activities (sometimes called line functions) are those involved in the
    physical creation of the product, marketing and transfer to the buyer, and after-
    sale support.
    Q Secondary activities (some.times called staff or overhead functions) assist the
    finn as a whole by providing infrastructure or inputs that allow the primary
    activities to take place on an ongoing basis.
    Q The value chain includes a profit margin since a markup above the cost of
    ,providing a firm's value-adding activities is normally part of the price paid by the
    buyer-creating value that exceeds cost so as to generate a return for the effort.
    Q
    Q
    QPrimary Activities
    Q Inbound Logistics. The primary activities of inbound logistics are associated with
    receiving, storing, and distributing inputs to the product. Inbound logistics include:
    activities, costs and assets associated with obtaining fuel, energy, raw materials, parts,
    components, merchandise, and consumable items from vendors; receiving, storing, and
    disseminating inputs from suppliers; inspection; and inventory management. .·,
    9 Operations. Operations include all activities associated with transfonning inputs into the
    final product form, .such as production, assembly, packaging, equipment maintenance,
    facilities, operations, quality assurance, and environmental protection.
    ¢ Outbound Logistics. These activities are.associated with collecting, stoiii:ig, and
    physically distributing the product or service to buyers (finished goods warehousing,
    order processing, order picking and packing, shipping, delivery vehicl_e operations):
    Q Marketing and Sales. The marketing and sales activities_are associated with purchases
    of products and services by end users and the.inducements used to get them to make
    purchases. These activities include adv.~rtjsing and promotion, market research and
    planning, and dealer/distributor support.
    ¢ Service. This primary activity includes all activities associated with providing service to
    enhance or maintain the value of the product, such as installation, repair, training, parts
    supply, maintenance and repair; technical assistance, buyer inquiries, product
    adjustment, and complaints.

    • Support Activities
    ¢ General Administration. These activities, sometimes called "firm infrastructure", are
    the activities, costs, and assets relating to general management, accounting and finance,
    legal and regulatory affairs, safety and security management infonnation systems, and
    other "overhead" functions. Unlike the other support activities, general administration
    activities generally support the entire value chain and not individual activities.
    ¢ Human Resources Management. Human resources management consists of activities
    involved in the recruiting, hiring, training, development, and compensation of all types of
    personnel; labor r~lations activities; and development of knowledge-based skills.
    • Support Activities(Corit.)

    Value Chain Analysis - Strategic Management Shailesh Dudani


    a)
    Q Ri~!arch, Technology, and Systems Development. The activities, costs, and assets
    re a mg to product R&D, process design improvement, equipment design, computer
    so~are _development, telecommunications systems, computer-assisted design and
    engmeenng, new database capabilities, and development of computerized support
    systems.
    Q Procure"!ent. Procurement refers to the function of purchasing inputs used in the firm's
    value ~ham, not to the purchased inputs themselves. Purchased inputs include raw
    matenals, supplies, and other consumable items, as well as assets such as machinery,
    laboratory equipment, office equipment, and buildings.

    •
    • Conducting a Value Chain Analysi~
    • Step 1. Divide the firm's operations into specific activities or business p~ocesses, usually
    grouping them according to primary and support activities. Within each category, a firm
    . typically performs a number of discrete activities that may represent key strengths or
    weaknesses.
    • . Step 2. Next, attach costs to each discrete activity.
    • Step 3. Recognize the difficulty in activity-based accounting.
    • Step 4. Identify the activities that differentiate the firm from their competitors.
    • Step 5. After documenting the value chain, managers need to identify the activities that
    are critical to buyer satisfactio,n and market success. These are the activities that
    deserve major scrutiny in an internal analysis.
    • The mission should influence managers' choice of the activities they examine in
    detail.
    • The nature of value chains and the relative importance of the activities within
    them vary by industry.
    • The relative importance .of value activities can vary by a company's position in a
    broader value system that includes the value chains of its upstream suppliers
    and .downstre~m ,customers or partners involved in providing products or
    services . .
    • Step 6. Compare to competitors.

    Generctl administration
    Human resource management

    Research, technology, and _systems developme

    Procurement

    Inbound Operations Outbound Marketing Service


    logistics logistics and
    sales

    Primary Activities
    /

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