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Value Chain analysis

A value chain identifies and

isolates the various economic
value adding activities of the firm
such as differentiating a product,
lowering cost, meeting customer
needs quickly.


of value-chain analysis is that

it provides
Components of value
chaina framework for
identifying or developing a distinctive competence
Inbound Logistics: Ordering, receiving, warehousing inputs
(such as raw materials), then distributing them to operations
as needed
Operations: Transforming inputs into finished products and
Outbound Logistics: Warehousing/distribution of finished
Marketing & Sales: identification of customer wants/needs,
creation of sales
Service: Customer support after the goods are sold
Support to these activities are provided by:
Firm infrastructure: Structure, leadership, control systems,
and company culture

Achieving a Cost Advantage

Once youre clearly defined your value chain for your proposed
venture, then the next step is to perform a thorough cost analysis
by assigning costs to each value chain activity. Porter mentioned
10 cost drivers where you might gain a cost advantage by
controlling these drivers better your competitors.
Economies of Scale
Capacity utilization
Linkages between activities
Interrelationships between business units
Degree of vertical integration
Timing of market entry
Firms policy of cost or differentiation
Geographic location
Institutional factors (regulation, unions, taxes, etc)

Another way you can gain competitive advantage is
through differentiation, which can occur anywhere in
the value chain. Differentiation comes from providing
unique value at some point in the value chain which
lowers costs or improves the quality of the final product.
Heres Porters drivers of uniqueness:
Policies and decisions
Linkages among activities
Institutional factors

Value chain at AMUL

Milk Producers
All milk producers in a village
2.2 million in Gujarat
10.6 million in India
Village Cooperative Society
All Villages in a District
10,675 villages in Gujarat
80,000 villages in India
District Dairy
Every District in the State
12 District Unions in Gujarat
180 Unions all over India
State Marketing Federation :
All Dairies in a State