Using this viewpoint, Porter described a chain of activities common to all businesses, and he divided them into primary and support activities, as shown below. For each of the Human Resource Management, Technology Development and Procurement support activities, determine the subactivities that create value within each primary activity.
Usefulness of value chain analysis[ edit ] Under the value chain analysisa typical a industry value chain incorporates three things.
How do you change business inputs into business outputs in such a way that they have a greater value than the original cost of creating those outputs? It illustrates the basic VCA for an automobile manufacturing company that competes on cost advantage. Marketing and sales — These are the processes you use to persuade clients to purchase from you instead of your competitors.
VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly. Although, primary activities add value directly to the production process, they are not necessarily more important than support activities.
Increasing the efficiency of any of the four support activities increases the benefit to at least one of the five primary activities. The second activity is operations, which encompasses all efforts to convert raw materials into a finished product.
For example, a manufacturer might require its parts suppliers to be located nearby its assembly plant to minimize the cost of transportation. Costs for labor-intensive activities will be driven by work hours, work speed, wage rate, etc.
Human resource management — This is how well a company recruits, hires, trains, motivates, rewards, and retains its workers.
For example, consider how human resource management adds value to inbound logistics, operations, outbound logistics, and so on. The simpler concept of value streamsa cross-functional process which was developed over the next decade,  had some success in the early s.
The Maintenance Value Chain approach is particularly successful when used as a tool for helping change management as it is seen as more user-friendly than other business process tools.
Again, look for direct, indirect, and quality assurance activities. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization. In addition to process elements, these reference frameworks also maintain a vast database of standard process metrics aligned to the Porter model, as well as a large and constantly researched database of prescriptive universal best practices for process execution.
Operations — These are the transformation activities that change inputs into outputs that are sold to customers. Managers can use the following strategies to increase product differentiation and customer value: Identify links between activities. And insurance companies offer policies to customers that are underwritten by larger re-insurance policies.
Quality assurance activities ensure that direct and indirect activities meet the necessary standards. Outbound logistics — These activities deliver your product or service to your customer. Identify opportunities for reducing costs. Definition Value chain analysis VCA is a process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation.
The sum total of link-level value-added yields total value. Using the tool There are two different approaches on how to perform the analysis, which depend on what type of competitive advantage a company wants to create cost or differentiation advantage.
Indirect activities allow direct activities to run smoothly. Porter terms this larger interconnected system of value chains the "value system". It can apply to whole supply chains and distribution networks.Michael Porter discussed this in his influential book "Competitive Advantage," in which he first introduced the concept of the value chain.
A value chain is a set of activities that an organization carries out to create value for its customers. The book describes the two primary methods of competitive advantage - differentiation and cost leader, and then proceeds to go through and explore the various components of the value chain that allow for the development and execution of the strategies/5(86).
A value chain is a high-level model developed by Michael Porter used to describe the process by which businesses receive raw materials, add value to the raw materials through various processes to.
The Value Chain. From. Competitive Advantage, by Michael Porter.
Every firm is a collection of activities that are performed to design, produce, market, deliver. The linkages in value chains can be finely tuned to gain a competitive edge. All firms make decisions that affect their competitive position and profitability.
Strategic planning is the.
Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage.Download