Value Chain Analysis

A company or an organization value chain identifies the primary activities and supporting activities create the value of end users of the product and services. The Value chain of the organization creates the value for the product and services. Organization is profitable if it the value chain for the product or services. The value chain creation functions are listed below: General Administration Operations Materials management Research and development Human Resource Infrastructures Procurement Marketing

 These functions gain to competitive advantage of an organization. Company or organization must perform value chain creation functions at a lower cost. The value creation process chain concept was popularized by Michael Porter.

 THE VALUE CHAIN PROCESS

PRIMARY ACTIVITIES

SECONDARY ACTIVITIES

Primary Activities
Primary activities are mentioned below: Purchased supplies and in-bound logistics. Operations Sales and marketing Service Primary activities aim to do with the creation of physical product.

Supporting Activities
The figure above highlights the supporting activities of the company or organization. It indicates to cross functional goals and value chain. Supporting activities are known as functional activities of the organization. They are as follows:

Research, technology and systems development Human Resource Management General administration Efficiency Quality Innovation Customer responsiveness

RESEARCH, TECHNOLOGY AND SYSTEMS DEVELOPMENT

HUMAN RESOURCE MANAGEMENT

GENERAL ADMINISTRATION

SUPPORTING ACTIVITIES
EFFICIENCY

CUSTOMER RESPONSIVENESS

QUALITY

 Value creation activities require strategies for formulation, implementation and monitor, guide and controlling of value-chain activities of the organization or company.

Company Value Chain

Primary Activities and costs Support activities and costs Purchased supplies and in-bound logistics Operations Distribution and out-bound logistics Sales and marketing services General Administration Profit margin

Product of R&D technology and systems development

Human Resource Management

Purchased supplies and in-bound logistics They are outlined as below:

Activities Costs Assets associated with purchasing fuel Past components Raw materials Merchandise and consumable items from vendors Storing, receiving and dissenting inputs Inventory management

Operations Operation activities are as follows: Activities Costs and assets associated with converting inputs into final product form (Production, assembly, packing, equipment, maintenance facilities, operations, quality assurance, and environmental protection.

Distribution of out-bound logistics These are: Activities Costs Assets dealing with physical distribution of products to buyers (finished goods, warehousing, order processing, order picking and packing, shipping, delivery vehicle operations, establishing and maintaining a network of dealers and distributors)

Sales and marketing:

Activities Costs Assets related to sales force efforts Advertising and promotion, market research and planning Dealer/distributor support

Service Service activities are as outlined: Activities Costs Assets associated with providing assistance to buyers such as installation, spare parts delivery, maintenance and repair, technical assistance, buyers enquiries and complaints.

Support Activities

Support activities are listed below:

Research, technology and systems delivered Human Resource Management General Administration

Research, technology and systems delivered as mentioned below: Activities Costs and assets relating to product R&D Process of R&D Process of design improvement Equipment design Computer software development Telecommunication systems New database capabilities The R & D function develops new products.

Human Resource Management

It refers to MPP, recruitment, hiring, training, development and compensation

General Administration General administration refers to administration of the organization such as legal and regulatory affairs, safety and security and MIS etc.

Steps in value chain analysis Breakdown an organization into its key activities Assess the potential for adding value via cost advantage Determine strategies built around focusing on activities where competition advantage can be sustained.

A PRESENTATION BY: SHRI S.B SHARAN