Strategic management - Value chain

Value Chain

A company's business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service All these activities that a company performs internally combine to form a value chain The value chain contains two types of activities Primary activities (where most of the value for customers is created) Support activities that facilitate performance of the primary activities

Linkages

Activities in the value affect one another Linkages require Co-ordinations

Characteristics of value chain analysis

Combined costs of all activities in a company's value chain define the company's internal cost structure Compares a firms costs activity by activity against costs of key rivals . From raw materials purchase to . Price paid by ultimate customer Pinpoints which internal activities are a source of cost advantage or disadvantage

Value chain goals

Establishes the activities of value to customers Allows you to assess cost and benefits of activities Compare your approach to activities relative to competitors

Value chain Primary activities

Inbound Logistics, - receiving storing Operations, - machining packing testing Outbound logistics - collect store and distribute, Marketing and sales - sales, advertiseing, promotion after sales service - installation, training, repair

Example: Value chain activities for a bakery

Primary Supply chain management recipe development and testing Mixing and baking Packaging Sales and marketing Distribution Secondary Quality control Human resource management Administration

Value chain secondary activities

Procurement Technology development - product, process, management HRM Firm Infrastructure - Systems (planning, finance, information management

Margin

What the customer is willing to pay over what it costs the firm to obtain resources and complete the value activities It represents the value created by the value activities and then the management of linkages between them