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Value Chain and Mc Model

Value Chain and Mc Model

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Published by meghanjan
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categoriesBusiness/Law
Published by: meghanjan on Sep 07, 2013
Copyright:Attribution Non-commercial

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Value Chain Analysis
 
Introduction
 Value Chain Analysis describes the activities that take place in a business and relates them to ananalysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:(1)
Primary Activities
- those that are directly concerned with creating and delivering a product(e.g. component assembly); and(2)
Support Activities
, which whilst they are not directly involved in production, may increaseeffectiveness or efficiency (e.g. human resource management). It is rare for a business toundertake all primary and support activities.Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").
Linking Value Chain Analysis to Competitive Advantage
 What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through
differentiating
itself through higher quality will have to perform its value chain activities better than the opposition.By contrast, a strategy based on seeking
cost leadership
will require a reduction in the costsassociated with the value chain activities, or a reduction in the total amount of resources used.
Primary Activities
 Primary value chain activities include:
 
Primary Activity
 
Description
 
Inbound logistics 
 All those activities concerned with receiving and storing externally sourcedmaterials
Operations 
 The manufacture of products and services - the way in which resource
 inputs
(e.g. materials) are converted to
outputs
(e.g. products)
Outbound logistics 
 All those activities associated with getting finished goods and services to buyers
 
Marketing and sales 
 Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)
Service 
 All those activities associated with maintaining product performance after the product has been sold
Support Activities
 Support activities include:
 
SecondaryActivity
 
Description
 
Procurement 
This concerns how resources are acquired for a business (e.g. sourcing andnegotiating with materials suppliers)
Human Resource Management 
 Those activities concerned with recruiting, developing, motivating andrewarding the workforce of a business
Technology Development 
Activities concerned with managing information processing and thedevelopment and protection of "knowledge" in a business
Infrastructure 
Concerned with a wide range of support systems and functions such asfinance, planning, quality control and general senior management
Steps in Value Chain Analysis
 Value chain analysis can be broken down into a three sequential steps:(1) Break down a market/organisation into its key activities under each of the major headings inthe model;(2) Assess the potential for adding value via cost advantage or differentiation, or identify currentactivities where a business appears to be at a competitive disadvantage;(3) Determine strategies built around focusing on activities where competitive advantage can besustained
 
 

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