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Chapter 3 - C hapter 3 Analyzing the Internal Environment...

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Chapter 3: Analyzing the Internal Environment of the Firm Value Chain Analysis Views the organization as a sequential process of value-creating activities It is when a firm engages in a series of activities that combines the various inputs to create the product that the firm brings to the marketplace Competitive terms – value is the amount that buyers are willing to pay for the good/ service Value can be measured by total revenue A firm is considered profitable if the value it receives is greater than the total costs involved to create the product/service 2 categories of value-creating activities (described by Porter): o Primary activities – physical creation of the product/service, sale and transfer to buyer and its service after sale inbound logistics – receiving, storing and distributing inputs to the product. Activities include material handling, warehousing inventory control, returns to suppliers Example of inbound logistics – just in time inventory systems – parts deliveries arrive at the assembly plants only hours before they are needed Operations – transforming inputs into the final product form. Activities includes machining, packaging, assembly, testing, printing and facility operations Example: creating environmentally friendly manufacturing outbound logistics – collecting, storing, distributing the product/service to buyers. Activities include finished goods, warehousing, material handling, delivery, order processing, scheduling
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marketing & sales – gathering market intelligence and understanding customers. Include purchases of good/services by end users, purchasing process of customers. Activities include market research, customer analysis, advertising, promotion, channel selection, pricing services – enhancing or maintaining the value of the product. Activities include installation, maintenance, support, repair, training, product adjustment o Support activities – add value by themselves or add value through important relationships with both primary and other support activities. Support activities facilitate the primary activities and ensure that they operate efficiently and effectively Procurement – purchasing inputs to be used in the firm’s value chain.
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