VALUE CHAIN ANALYSIS IN BUSINESS

                                    VALUE CHAIN ANALYSIS

Value chain analisis describes the activities of a business and relates them to an analysis of competitive strength of the business. It was developed by Michael Porter. He suggested that they be grouped into two: Primary activities and support services (secondary activities).

1) Primary Activities - those that are directly concerned with creating and delivering a product

                                                                                                                                                     a) Inbound logistics: Here the raw materials or the goods are received from the supplier. They are stored until when they are needed.                                                         b) Operations: This is where the resources and inputs are converted to output. The goods are manufactured or assembled into finished products.                              c) Outbound logistics:  here the main concern is to deliver the finished goods to the market. They can be sent along the supply chain to wholesalers and retailers or directly to the final consumer.                                                                                      d) Marketing and sales: Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.).This area focuses mainly on communication and the promotion mix. Service: All those activities associated with maintaining product performance after the product has been sold. This includes after sales service such as installation and complaints handling.

(2) Support Activities/secondary activities- which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management).

                                                                                                                                                         a) Procurement : This is mainly concerned with how to acquire resources for the business. Resources like raw materials are purchased, ensuring that they are of the highest quality and the best price.                                                                                   b) Technology development: Activities concerned with managing information processing and the development and protection of "knowledge" in a business it is a source of competitive advantage. Companies need to innovate in order to reduce costs and to protect and sustain competitive advantage. Some activities are like use of new invented machines and Electronic marketing.                                        c) Human resource management: The employees are the most important recourses in a business though they are the most expensive. The main activities it’s concerned with are recruiting, developing, motivating and rewarding the workforce of a business. The mission and the objectives of the organization would be the driving force behind the Human Resource Management strategy.                             d) Infrastructure: this activity is driven by corporate or strategic planning.  It’s mainly concerned with a wide range of support systems and functions such as finance, 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 an organization into its key activities under each of the major headings in the model.

(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage.

(3) Determine strategies built around focusing on activities where competitive advantage can be sustained.

Reference

http://tutor2u.net/business/strategy/value_chain_analysis.htm

KCA UNIVERSITY

BACHELOR OF COMMERCE

VALUE CHAIN ANALISIS

CODE: CAM 204

CYNTHIA JEPCHUMBA LETING

REG NO: 07/02651

TO; NORA

DATE: 31.05.2011