M o ne f unctio n to ano ther fo r example an o rder

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Unformatted text preview: o nents o f the value chain and f o ur suppo rting co mpo nents. The primary co mpo nents are: Inbo und lo gistics—getting needed materials and o ther inputs into the f irm f ro m suppliers Operatio ns—turning inputs into pro ducts o r services Outbo und lo gistics—delivering pro ducts o r services to co nsumers, distributio n centers, retailers, o r o ther partners Marketing and sales—custo mer engagement, pricing, pro mo tio n, and transactio n Suppo rt—service, maintenance, and custo mer suppo rt The seco ndary co mpo nents are: Firm infrastructure—f unctio ns that suppo rt the who le f irm, including general management, planning, IS, and f inance Human reso urce management—recruiting, hiring, training, and develo pment Techno lo gy / research and dev elo pment—new pro duct and pro cess design P ro curement—so urcing and purchasing f unctio ns While the value chain is typically depicted as it’s displayed in the f igure belo w, go o ds and inf o rmatio n do n’t necessarily f lo w in a line f ro m o ne f unctio n to ano ther. Fo r example, an o rder taken by the marketing f unctio n can trigger an inbo und lo gistics f unctio n to get co mpo nents f ro m a supplier, o peratio ns f unctio ns (to build a pro duct if it’s no t available), o r o utbo und lo gistics f unctio ns (to ship a pro duct when it’s available). Similarly, inf o rmatio n f ro m service suppo rt can be f ed back to advise research and develo pment (R&D) in the design o f f uture pro ducts. Figure 2. 2 The Value Chain When a f irm has an imitatio n-resistant value chain—o ne that’s to ugh f o r rivals to co py in a way that yields similar benef its—then a f irm may have a critical co mpetitive asset. Fro m a strategic perspective, managers can use the value chain f ramewo rk to co nsider a f irm’s dif f erences and distinctiveness co mpared to rivals. If a f irm’s value chain can’t be co pied by co mpetito rs witho ut engaging in painf ul trade-o f f s, o r if the f irm’s value chain helps to create and strengthen o ther strategic assets o ver time, it can be a key so urce f o r co mpetitive advantage. Many o f the examples used in this bo o k, including FreshDirect, Amazo n, and Zara, illustrate this po int. An analysis o f a f irm’s value chain can also reveal o peratio nal weaknesses, and techno lo gy is o f ten o f great benef it to impro ving the speed and quality o f executio n. Firms can o f ten buy so f tware to impro ve things, and to o ls such as supply chain management (SCM; linking inbo und and o utbo und lo gistics with o peratio ns), custo mer relatio nship management (CRM; suppo rting sales, marketing, and in so me cases R&D), and enterprise reso urce planning so f tware (ERP ; so f tware implemented in mo dules to auto mate the entire value chain), can have a big impact o n mo re ef f iciently integrating the activities within the f irm, as well as with its suppliers and custo mers. But remember, these so f tware to o ls can be purchased by co mpetito rs, to o . While valuable, such so f tware may no t yield lasting co mpetitive advantage if it can be easily matched by co mpetito rs as well. There’s po tential danger here. If a f irm ado pts so f tware that changes a unique pro cess into a generic o ne, it may have co -o pted a key so urce o f co mpetitive advantage particularly if o ther f irms can buy the same stuf f . This isn’t a pro blem with so mething like acco unting so f tware. Acco unting pro cesses are standardized and acco unting isn’t a so urce o f co mpetitive advantage, so mo st f irms buy rather than build their o wn acco unting so f tware. But using packaged, thirdparty SCM, CRM, and ERP so f tware typically requires ado pting a very specif ic way o f do ing things, using so f tware and metho ds that can be purchased and ado pted by o thers. During its perio d o f P C-industry do minance, Dell sto pped deplo yment o f the lo gistics and manuf acturing mo dules o f a packaged ERP implementatio n when it realized that the so f tware wo uld require the f irm to make changes to its unique and highly successf ul o perating mo del and that many o f the f irm’s unique supply chain advantages wo uld change to the po int where the f irm was do ing the same thing using the same so f tware as its co mpetito rs. By co ntrast, Apple had no pro blem ado pting third-party ERP so f tware because the f irm co mpetes o n pro duct uniqueness rather than o peratio nal dif f erences. Dell’s Struggles: Nothing Lasts Forever Michael Dell enjo yed an extended run that to o k him f ro m assembling P Cs in his do rm ro o m as an undergraduate at the University o f Texas at Austin to heading the largest P C f irm o n the planet. Fo r years Dell’s superef f icient, vertically integrated manuf acturing and direct-to co nsumer mo del co mbined to help the f irm earn seven times mo re pro f it o n its o wn systems when co mpared with co mparably co nf igured rival P Cs.B. Breen, “Living in Dell Time,” Fast Co mpany, Dece...
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