Prof.

Soumya Ranjan Padhi

 To analyze organizational production and
support processes for their contribution
to competitive advantage
 Competitive advantage arises from the
discrete activities a firm performs in
designing,producing,marketing,delivering
and supporting its product better than
the competition
 The tool is designed to assist with analysis at
the functional level
 It provides a framework for evaluating the
contribution made by internal processes to
overall customer value
 It does not consider issues in external
environment except when there is internal
process design or implementation
 Organizational values and culture are not
addressed by application of this tool
 It helps in analyzing the strength and weakness
by providing a framework for a structured and
systematic analysis of specific operation
 Primary activities
 Support activities
 Primary activities are those activities
which directly involved with adding value
to inputs and transforming them into
goods or services desired by customers
 Support activities are those activities
necessary to support or enable the
primary activities
 It should be applied where there is
coherent set of functional activities
directed at servicing particular market
 As industry has different segments which
need different set of processes for which
it needs different economic relationship
and dynamics
 Each organizational value chain is unique
and based on individual strategy and
history
 Identify the actual activities performed
by the business unit in each of the
generic category
 Analyze the value added by each of
these activities in terms of overall
business strategy
 Examine how linkages and flows build
value as processes flow across task
 Examine how flows into and out of the
organization occurs
 Than any changes in the internal process can
improve the interface with suppliers or
customers at the various stages in the value
adding process
 Identify those activities which are key to success
of BS
 Examine the resource allocations with a view to
allocating resources in accordance with the
contribution of the task to strategic direction
 Once organization value chain is analyzed than
strategy should be made as how this can be
aligned with the value chain of suppliers and
customers
 Isolate and analyze those activities that
have
1. Different economics
2. High potential impact of differentiation
3. Represent a growing proportion of cost
 Use the VC to identify the critical functions
which the organization need to benchmark with
comparable process of other organizations
 Identify the linkages between your value chain
and that of providers and customers to identify
the ways of improving the value adding flow
through the full productive chain to ultimate
end user
 Do not analyze the organization in terms of
current organization structure
 This is most valuable when synergies and flows
of tangibles or information are mapped over the
value chain
 Value Creating Activities common to a
Cost Leadership Business Level Strategy
Simplified Planning Relatively Few
Cost Effective
MIS Systems Firm Infrastructure
Practices to Reduce
Planning Costs
Management Layers to
Reduce Overhead
Activities

M
Support

Effective Training Programs

Human Resource Management
Consistent Policies to
Reduce Turnover Costs to Improve Worker
Efficiency and Effectiveness A
Easy-to-Use Manufacturing Investments in Technology in order
RG
Technological Development
Technologies to Reduce Costs Associated with
Manufacturing Processes
IN
Systems and Procedures to find the
Procurement
Frequent Evaluation Processes to
Lowest Cost Products to Purchase
Raw Materials
Monitor Suppliers’ Performances

Highly Efficient Efficient Plant Delivery Schedule Small, Highly Effective Product

Service
Systems to Link Scale to Minimize that Reduces Trained Sales Installations to
Operations

Suppliers’ Manufacturing
Outbound
Costs Force Reduce Frequency

Marketing
Logistics
Inbound

Products with the Costs and Severity

& Sales
Logistics

IN
Firm’s Production Selection of Low Products Priced to of Recalls
Processes Timing of Asset Cost Transport Generate Sales

G
Purchases Carriers Volume

R
A
Located in Close Policy Choice of Efficient Order National Scale

M
Proximity with Plant Technology Sizes Advertising
Suppliers
Organizational Interrelationships
Learning with Sister Units

Primary Activities
 Value Creating Activities common to a
Differentiation Business Level Strategy
Highly Developed Information A companywide
Firm Infrastructure
Systems to better understand
customers’ purchasing preferences
emphasis on producing
high quality products
Activities

Compensation programs Extensive use of subjective Superior

M
Support

Human Resource Management

intended to encourage worker
creativity and productivity
rather than objective
performance measures
personnel
training A
Coordination among R&D, Investments in technologies that will Strong
RG
Technological Development
product development and
marketing
allow the firm to consistently produce
highly differentiated products
capability in
basic research
IN
Systems and procedures used to find Purchase of highest quality
Procurement
the highest quality raw materials
replacement parts

Superior Consistent Accurate and Strong Coordin- Complete field

Service
handling of manufacturing of responsive order ation among stocking of
Operations

Outbound functions in R&D, replacement parts

Marketing
incoming raw attractive processing
Logistics
Inbound

Marketing and

& Sales
materials to products
Logistics
procedures

IN
minimize Product
damage and Development

G
improve the

R
Rapid responses Extensive
quality of the Rapid and timely personal

A
to customers
final product product deliveries relationships

M
unique
manufacturing to customers with buyers
specifications
Premium
Pricing

Primary Activities