What are the primary activities in value chain analysis explain by giving examples?
Value chain analysis is a tool that business owners use to break down each process their business uses. This analysis can be used to improve the business’s individual processes, enhancing the company’s efficiency and establishing a competitive advantage. Show
Value chain analysis is used by businesses of all sizes, ranging from sole proprietors to enterprise-level companies. Every business uses various processes to accomplish its work, and they all can use value chain analysis to study and improve these processes. What is value chain analysis?A value chain is the full range of activities – including design, production, marketing and distribution – that businesses conduct to bring a product or service from conception to delivery. For companies that produce goods, the value chain starts with the raw materials to make the products and consists of everything added before the product is sold to consumers. Value chain analysis finds any deficiencies in these processes and improves them, saving money, improving quality and expediting time to market. Value chain analysis can create change within a business, improve the products and services it offers, and expand connections with other companies and their customers or clients. The United States Postal Service (USPS) explains the purpose of value chain analysis is “to create value that exceeds the cost of providing the product or service and generates a profit margin.” Value chain vs. supply chainA supply chain and value chain are similar, but the value chain takes a few more things into consideration. “The supply chain generally looks at the parts or materials that go into a product, where a product is manufactured, and the transportation logistics of getting it from the factory to the store,” said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation. The value chain “takes into consideration contributions such as product design, research and development, advertising, and other marketing,” he said. “Even the work of lawyers, bankers, accountants and IT experts who help make a product possible is taken into consideration.” What is Porter’s value chain framework?Harvard Business School’s Michael E. Porter was the first to introduce the concept of a value chain. Porter, who also developed the Five Forces model to show businesses where they rank amongst their competition in the marketplace, discussed the value chain concept in his book Competitive Advantage: Creating and Sustaining Superior Performance (Free Press, 1998). “Competitive advantage cannot be understood by looking at a firm as a whole,” Porter wrote. “It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to a firm’s relative cost position and create a basis for differentiation.” [Learn how to do a competitor analysis.] In his book, Porter splits a business’s activities into two categories: primary and support. Primary activitiesThese are a company’s primary functions; in other words, all the things needed to create and sell their product:
Support activitiesSupport activities help the primary functions:
 How do you conduct a value chain analysis?To conduct a value chain analysis, a business should identify each part of its production process, noting steps that can be eliminated and other possible improvements. This helps companies determine where the best value lies with customers and expand or improve said value, resulting in cost savings or enhanced production. At the end of the process, customers enjoy high-quality products at lower costs, which will lead them to choose you over your competition. There are two approaches to value chain analysis: cost advantage and differentiation advantage. These are lenses through which you should analyze your business. Cost advantageAfter identifying their primary and support activities, businesses should determine the cost drivers for each activity. A cost driver is something that affects the cost of an activity or process, such as the following:
Your business should identify the links between activities, understanding that if costs are reduced in one area, they can be reduced in another. You can then identify opportunities to reduce overall costs. [Learn how to save money and boost productivity by upgrading your business technology.] Differentiation advantageIdentifying the activities that create the most value to customers is the priority here. What activities set your business apart and provide the most value? These activities can include the below:
The next step is evaluating these strategies to improve the value they provide. For example, you might focus on customer service, increase options to customize products or services, offer incentives or add product features. Consider which of these unique activities can be maintained over the long term and which provide the most value. What are the goals and outcomes of value chain analysis?Value chain analysis will help you identify areas in your business that can be optimized for efficiency and profitability. You want to not only ensure your mechanical processes are the best they can be, but you also want to keep customers feeling confident and secure so they remain loyal to your business. By analyzing and evaluating product quality and the effectiveness of your services, along with reducing company costs, your business can find strategies to improve its value proposition and stand out in the marketplace. What are the benefits of a value chain analysis?There are multiple benefits to value chain analysis:
Businesses can use the insights they gain from value chain analysis to identify priority processes, streamline workflow and increase efficiencies. These, in turn, reduce costs and overhead, increasing profit margins for the business. What are value chain management and mapping?Value chain management is how you organize all of your businesses’ activities. Managing activities in your value chain may involve reworking various systems, structures and processes. The key is to find areas of potential innovation (some even argue innovation is the key to successful businesses). Creating a strategy to develop and refine processes is key to maintaining company value. It helps businesses see precisely which areas they need to strengthen and how they can reduce costs. It also allows businesses to decide what’s most important when considering the value they want to create. Mapping out a value chain can be a great way to visualize all your business processes and see how they impact the company and your customers. Then you can make decisions on what to improve and how. In both value chain management and mapping, communication is paramount. Stakeholders across the company’s processes need to remain in contact and open to collaboration. What is an example of a successful value chain?A prime example of a business creating value for its customers and following the value chain framework is Starbucks. Through its operations, the company creates connections worldwide, guarantees high-quality flavors and works to build a sustainable future. This is possible because of its value chain and ongoing analysis. Starbucks’ value chain, like many others, is complex, but ensures value that will impress customers and keep them invested in the company. Starbucks begins by tasting a variety of coffees that use beans from locations like Latin America, Africa, Arabia, Asia and the Pacific (inbound logistics). The company spends time visiting coffee growers and building lifelong relationships. Starbucks creates partnerships all over the globe to ensure the best coffee for its customers. Its coffee is then sold in stores worldwide (operations, outbound logistics) and allows customers to enjoy high-quality flavors at home or in a local Starbucks. Another part of Starbucks’ value chain is interacting with customers and ensuring the company provides excellent service. Its social media accounts are a prime spot for interaction, which the company leverages to reinforce its marketing, sales and customer service. Starbucks presents its coffee as “the end of a long journey – from the land, to the farmer, to the roaster, to your eagerly waiting hands. Each step is important in defining what that coffee will taste like.” The value chain analysis identifies each step and seeks ways to refine the process so Starbucks continues to remain cost-efficient and the top competitor in the marketplace. Why does value chain analysis matter?Value chain analysis is an in-depth examination of all of the steps a business takes, from acquiring materials to producing, distributing and selling its products or services. Conducting this analysis gives business owners and managers deep insights into the major cost and profit centers of their company. With that knowledge, they can reduce waste, identify strategic advantages, and invest in the most successful areas of their business. Kayla Harrison and Katherine Arline contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article. What are the primary activities in value chain analysis?The value chain framework is made up of five primary activities -- inbound operations, operations, outbound logistics, marketing and sales, service -- and four secondary activities -- procurement and purchasing, human resource management, technological development and company infrastructure.
What is value chain activities with examples?The activities associated with this part of the value chain are providing service to enhance or maintain the value of the product after it has been sold and delivered. Examples: installation, repair, training, parts supply and product adjustment.
What is value chain analysis explain process of value chain with help of an example?Value chain analysis is a means of evaluating each of the activities in a company's value chain to understand where opportunities for improvement lie. Conducting a value chain analysis prompts you to consider how each step adds or subtracts value from your final product or service.
Which of the following is an example of a primary activity in a value chain?The primary activities of the value chain include inbound logistics, operation outbound logistics, marketing and sales, and service. Secondary activities or the support activities include firm infrastructure, human resources management, and procurement.
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