Internal Environment -Value Chain Analysis

Outsourcing Decisions

A firm may outsource all or only part of one or more primary and/or support activities.

Value Chain

A sequential process of value-creating activities within the firm, within an industry, or in the economy

Research and development

Activities completed to improve a firm's product and the processes used to manufacture it (process equipment, basic research, product design) Positive collaborative relationships between R&D and other departments Excellent professional qualifications of personnel

Procurement

Activities completed to purchase inputs needed to produce a firm's products (raw materials and supplies, machines, laboratory equipment) Development of collaborative "win-win" relationships with suppliers Analysis and selection of alternate sources of inputs to minimize dependence on one supplier

Human resource management

Activities involved in recruiting, hiring, training, developing, and compensating all personnel Effective recruiting, development, and retention mechanisms for employees Quality relations with trade unions Reward and incentive programs to motivate all employees

Operations

Activities necessary to transform the inputs into final products (machining, packaging, assembly) Efficient plant operations Incorporation of appropriate process technology Efficient plant layout and workflow design

Inputs

Activities used to receive, store, and disseminate inputs to a product (materials handling, warehousing, inventory control) Location of distribution facilities Warehouse layout and designs

Value Chain Anlysis Allows

Allows managers to understand the parts of its operations that create value (keep in-house) and those that do not (outsource) Allows managers to understand how their activities create value uniquely, compared to competitors

Distribution

Associated with collecting, storing, and distributing the product to customers Effective shipping processes to provide quick delivery and minimize damages Shipping of goods in large lot sizes to minimize transportation costs.

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

Conducting Value Chain Analysis

Identify value chain activities Evaluate value-creation properties & cost characteristics Identify improvements to capture greater value

Primary Activities

Inputs Operations Distribution Marketing and sales Service

Support Activities

Procurement Research and development Human resource management

Value Analysis

Products and services are outcomes of activities performed by businesses. Value is determined by the amount that buyers are willing to pay for what a firm provides them

Service

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

General administration - finance, IS, legal

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

Industry Value Chain

suppliers > firms > customers