Explain value chain concept and present various purposes it can be used. Which strategy it usually asssociated and why? what are limitation Explain Value Chain Concept The concept of value chain illustrates a firm’s operations and activities it performs in order to supply its product or service in the market. The value chain consists of primary, including activities like logistics, operations, marketing and sales, service, and support activities like human resources management, R&D, procurement, and firm infrastructure. The objective of primary activities of a firm is the core operations in delivering its good or service, while the support functions will feed into all the primary activities of the firm. Primary Activities o These are line activities associated with production, transformation, delivery, and sales. They are classified into four main categories: o Inbound Logistics: are activities involved in receiving, storing, and provisioning the inputs needed to deliver a product. They include warehousing and control of materials and inventory. o Operations: are activities that package, maintain, and transform inbound logistics into the final product. These activities can lead to differentiation and lower costs if performed in an efficient manner. o Outbound Logistics: are activities that pick, pack, store, and deliver the finished product to the end customers. o Marketing and Sales: are activities involved in advertisement, promotion, distribution channel management, marketing and sales of products. They ensure all customer needs are considered in order to develop better future products. o Service: are activities that maintain and improve the value of the product to the customers by providing installation, repair, training, and supporting services after delivery.
o These activities support the primary activities and include human resource management, procurement, technology development, and organizational infrastructure. o Procurement: are activities involved in purchasing raw materials, supplies, and fixed assets (equipment, machinery) and transmitting them across the value chain. o Technology Development: are activities including R&D, design, processing, and servicing of the product manufacturing process and the product itself. o Human Resource Management: are activities involved in recruiting, training, developing, empowering, and rewarding employees. o Organizational Infrastructure: are activities including finance, accounting, planning, legal, governmental, and quality, and general management matters. In each step of the value chain, the company will add value, more or less, to each stage in order to achieve its finished product or service. The firm’s profit margin is affected by its primary and support activities; the firm may choose to cut cost in certain stages of the value chain or add value or investment in specific activities to achieve its cost leadership or differentiation strategy.
- Fall '17