Scribd
Upload
6 views

Value Chain Analysis

Value chain Analysis simplified

Uploaded by

maherakm0
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
6 views

Value Chain Analysis

Value chain Analysis simplified

Uploaded by

maherakm0
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 7

TOPIC FOUR

VALUE CHAIN ANALYSIS


By the end of the session, learners should be able to;
a) Describe the concept of value chain analysis
b) Differentiate value chain from supply chain
c) Discuss the main dimensions of value chain analysis:
d) Determine the activities of value chain analysis
DESCRIBE THE CONCEPT OF VALUE CHAIN ANALYSIS
Value chain analysis is a strategic management tool that businesses use to identify and
evaluate the activities that create value for their customers. It was developed by Harvard
Business School Professor Michael Porter in the 1980s.
The value chain is a series of interconnected activities that a business performs in order to
create and deliver a product or service to its customers. It includes all of the activities that take
place from the initial sourcing of raw materials to the final delivery of the product or service to
the customer.

Porter identified two main types of value chain activities: primary activities and support
activities.

Primary activities are those that are directly involved in creating and delivering the product or
service to the customer. They include:

● Inbound logistics: receiving and storing raw materials and components.


● Operations: transforming raw materials and components into finished products.
● Outbound logistics: delivering finished products to customers.
● Sales and marketing: generating leads and converting them into customers.
● Customer service: providing support to customers after they have purchased the
product or service.

Support activities are those that support the primary activities. They include:

● Procurement: purchasing raw materials and components.


● Human resource management: recruiting, hiring, training, and managing employees.
● Technological development: developing and maintaining the technology needed to
create and deliver the product or service.
● Infrastructure: providing the physical and organizational infrastructure needed to
support the primary and support activities.

1 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
Value chain analysis involves identifying and evaluating each of the value chain activities to
determine where value is created for customers and where costs can be reduced. Businesses
can then use this information to develop strategies to improve their competitive advantage.

Overall, value chain analysis is a powerful tool that businesses can use to improve their
efficiency, profitability, and competitive advantage.

DIFFERENTIATE VALUE CHAIN FROM SUPPLY CHAIN


1. Definition:
● A supply chain is a network of people, businesses, resources, activities, and
technologies involved in the procurement, production, and distribution of a
product or service.
● A value chain is a series of activities that add value to a product or service for the
customer.
2. Focus:
● The supply chain is focused on the efficiency and effectiveness of the flow of
goods and services from the raw material stage to the customer.
● The value chain is focused on creating and delivering value to the customer.
3. Process:
● Supply chains are considered to be operational management processes and are mostly
logistical. Supply chain thinking is all about how to accomplish manufacturing and
distribution tasks efficiently and at low cost
● Value chain processes are about gathering information to discover what customers value
and figuring out how to produce the product with those qualities.

4. Activities
● Supply chains are all about getting physical things transported and manufactured
cheaply, quickly and correctly
● value chain activities encompass a broader set of business functions.
● It is primary and supportive operations

5. Originated from:
● Supply chain is originated from operational management
● Value chain originated from business management

2 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
The demand chain is the set of processes and activities that a company uses to generate,
track, and fulfill customer demand. It includes all the steps involved in understanding customer
needs, developing and marketing products and services to meet those needs, and delivering
those products and services to customers in a timely and efficient manner.

The demand chain typically includes the following processes:

● Market intelligence: Gathering and analyzing information about customer needs,


preferences, and trends.
● Demand planning: Forecasting future customer demand and developing plans to meet
that demand.
● Product development: Developing and launching new products and services that meet
customer needs.
● Marketing and sales: Promoting and selling products and services to customers.
● Order management: Processing and fulfilling customer orders.
● Warehouse and distribution: Storing and delivering products to customers.

3 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
DISCUSS THE MAIN DIMENSIONS OF VALUE CHAIN ANALYSIS

The main dimensions of value chain analysis are:

● Primary activities: These are the activities that are directly involved in the production
and delivery of the product or service to the customer. They include inbound logistics,
operations, outbound logistics, marketing and sales, and service.
● Support activities: These are the activities that support the primary activities. They
include procurement, human resource management, technology development, and
infrastructure

DETERMINE THE ACTIVITIES OF VALUE CHAIN ANALYSIS

Primary activities are those that are directly involved in creating and delivering the product or
service to the customer. They include:

● Inbound logistics: receiving and storing raw materials and components.


● Operations: transforming raw materials and components into finished products.
● Outbound logistics: delivering finished products to customers.
● Sales and marketing: The activities involved in informing potential customers about the
product, persuading them to buy and enabling them to do so, including advertising, promotion,
market research and dealer/distributor support. These activities widely attributed by adopting
marketing functions such as communication, channel management as well as advertising,
promotion, pricing,
● Customer service: providing support to customers after they have purchased the
product or service.

Support activities are those that support the primary activities. They include:

● Procurement: purchasing raw materials and components.


● Human resource management: recruiting, hiring, training, and managing employees.
● Technological development: developing and maintaining the technology needed to
create and deliver the product or service.
● Infrastructure: providing the physical and organizational infrastructure needed to
support the primary and support activities

4 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
Steps of value chain analysis

A typical value chain analysis can be performed in the following steps:

a. Analysis of own value chain; this is by relating to costs to every single activity
of the firm
b. Analysis of customers value chains; this entails how does our product fit into
their value chain on the basis of customers wants and needs
c. Identification of potential cost advantages in comparison with competitors
d. Identification of potential value added for the customer – how can our product
add value to the customers value chain (e.g. lower costs or higher performance) –
where does the customers see such potential

5 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
6 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]
7 Prepared by cpsp and cpa (ip) abubakari mrisho contact 0717581404 email [email protected]

You might also like