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Slide1: Value Chain Analysis is a three-step process

1. Separate the organizations operation into primary and support activities.

2. Allocate cost to each activity.
3. Identify the activities critical to customer satisfaction and market success.
Slide 2: Separate the organizations operation into primary and support
- 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
- Support activities: facilitate the primary activities. For example: HR
+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.
Slide 3: Value chain

Slide 5: Primary Activity: Inbound Logistics

Associated with receiving, storing and distributing inputs to the product

Location of distribution facilities
Warehouse layout
and designs

Slide 6: 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
Slide 7: 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
Slide 8: 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
Slide 9: Primary Activity: Service
Associated with providing service to enhance or maintain the value of the
Quick response to customer needs and emergencies
Quality of service
personnel and
ongoing training

Slide 10:

Support Activity: Procurement

Function of purchasing inputs used in the firms value chain

Procurement of raw material inputs
Development of collaborative win-win relationships with

Analysis and selection of alternate sources of inputs to minimize

dependence on one supplier
Slide 11: 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
Quality relations with trade unions
Reward and incentive programs to motivate all employees
Slide 12: 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
Excellent professional qualifications of personnel
Slide 13: 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
Slide 14: Interrelationships among Value-Chain Activities within and across
Two levels:
Interrelationships among activities within the firm

Relationships among activities within the firm and with other

organization (e.g., customers and suppliers)
Slide 15: Allocate cost to each activity
Activity cost information provides managers with valuable insight into the
internal capacities of an organization.
Slide 16: Identify the activities critical to customer satisfaction and market
3 important considerations in evaluating the role of each activity in value chain:
- Company mission, influencing the choice of activities undertaken.
- Industry type, which influences the relative importance of activities.
- Value system, including the value chains of an organizations upstream
and downstream partners in providing products to end-customers.
Slide 17: Benchmarking
- Benchmarking is a analytical tool used to determine whether a firms
value chain activities are competitive compared to rivals and thus
conducive to winning in the marketplace.
- Several different types of benchmarking:
+ Internal Benchmarking: compares one operating unit or function with
another within the same industry
+External Benchmarking: compare internal functions with those of the
best external practitioners, regardless of their industry.
+Competitive Benchmarking: gather information about direct competitors
through techniques such as reserve engineering.
+Strategic Benchmarking is a type of competitive benchmarking aimed
specific at strategic action and organization change.
Slide 6: Benchmarking
Benchmarking programmes comprise 4 steps:
-Identification and/ or calibration of performance gap
-Clarification of the strategic impact of the benchmarked process
-Identification and implementation of process improvements or strategic

-Maintaining stimulus for continuous improvement.