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Value Chain Analysis EXPLAINED | B2U | Business To You

Value Chain Analysis EXPLAINED | B2U | Business To You

In this video, we will be discussing the concept of value chain analysis and how it can help organizations assess their internal activities and gain a competitive advantage. Value chain analysis, introduced by Michael Porter, is a systematic approach that maps out an organization's value chain to determine where it creates value and how it can create a competitive advantage.

Mapping the Organization's Value Chain

A company's value chain consists of a series of activities that it undertakes to design, produce, market, and support its products or services. These activities can be divided into primary activities, which involve the physical creation and delivery of the product, and support activities, which provide the necessary support for the primary activities.

The primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service and support. Inbound logistics involves sourcing and managing inputs, while operations transform these inputs into the final product. Outbound logistics deals with the distribution and delivery of the product to customers, while marketing and sales focus on promoting and selling the product. Finally, service and support activities ensure that customers are satisfied with the product after purchase.

Support activities include procurement, technology development, human resource management, and firm infrastructure. Procurement is responsible for purchasing inputs, while technology development focuses on improving the product and production process through technological advancements. Human resource management ensures that the right personnel are available and trained for the various value chain activities, and firm infrastructure comprises activities such as general management, finance, and quality management.

Real-Life Example of Value Chain Analysis

To illustrate the concept of value chain analysis in practice, let's take a look at Besseling Technologies, a company that produces cleaning robots for greenhouse rooftops. In this case, the inbound logistics activities include sourcing inputs such as materials and electricity, while operations involve the production and assembly of the cleaning robots. Outbound logistics deals with the distribution of the finished product to customers worldwide, and marketing and sales activities focus on promoting and selling the robots. Finally, service and support activities ensure that customers receive installation, repair, and maintenance services.

Optimization and Coordination within the Value Chain

Optimization and coordination are crucial elements in value chain analysis. Optimization involves improving specific activities within the value chain to enhance efficiency and effectiveness. For example, improving the inspection of purchased materials in inbound logistics can lead to better quality control and lower costs. Coordination, on the other hand, ensures that all activities within the value chain work together seamlessly. This includes communication, alignment, and avoiding redundant work. Effective coordination can lead to smoother processes and increased competitiveness.

Keywords

Value chain analysis, primary activities, support activities, inbound logistics, operations, outbound logistics, marketing and sales, service and support, procurement, technology development, human resource management, firm infrastructure, optimization, coordination.

FAQ

  1. What is value chain analysis? Value chain analysis is a systematic approach that maps out an organization's series of activities to determine where it creates value and how it can gain a competitive advantage.

  2. What are primary activities in value chain analysis? Primary activities are the physical creation and delivery of a product or service, including inbound logistics, operations, outbound logistics, marketing and sales, and service and support.

  3. What are support activities in value chain analysis? Support activities provide the necessary support for the primary activities and include procurement, technology development, human resource management, and firm infrastructure.

  4. How can value chain analysis improve efficiency? By optimizing specific activities within the value chain, organizations can improve efficiency and effectiveness, leading to smoother processes and increased competitiveness.

  5. What is the role of coordination in value chain analysis? Coordination is essential to ensure that all activities within the value chain work together seamlessly, avoiding communication gaps, alignment issues, and redundant work. Effective coordination can lead to improved competitiveness.

  6. How does value chain analysis help organizations gain a competitive advantage? By analyzing the value chain and identifying areas where they can perform activities more efficiently or better than their competitors, organizations can create a competitive advantage and achieve higher margins.