3.4
The Value Chain
Value refers to the sum a buyer is willing to pay for what a supplier delivers in a competitive context
Value Chain Analysis helps the organisation understand in detail each aspect of the value chain and how more value may be added and the aspects of the value-added process
Value Chain contains all the activities an organisation complete to deliver value to customers
Primary Activities
Support Activities
Inbound Logistics
Operations
Outbound Logistics
Marketing and Sales
Services
Firm Infrastructure
Human Resources Management
Technology Development
Procurement
Value Chain Analysis enables the organisation to understand the interrelations and interdependent of their activities such as:
Identify what activities it undertake
Understand why these activities add value
See how they fit together
Understand the way in which they are different from competitiors' activities
Value System
Supplier Value Chains
Firm Value Chain
Channel Value Chains
Buyer Value Chains
"Every firm is a collection of activities that are performed to [ultimately] deliver and support its product [or service]"
Porter, 1985, p.36 (Competitive Advantage Book)
"The relevant level for constructing a value chain id a firm's activities in a particular industry (Business unit)"
Porter, 1985, p.36 (Competitive Advantage Book)
General management
Planning
Finance
Accounting
Legal
Activities Types (Primary & Support)
Direct
Indirect
Quality Assurance
Help direct activities continuity
Activities directly involved in creating value
Monitoring, testing and inspecting
Competitive Scope and the Value Chain
Segment Scope
Vertical Scope
Geographic Scope
Industry Scope
Products Varieties produced
Buyers served
In-hoes performed activities
Out-sources activities
Dr Hakan Ozlap Lecture
Value Chain
The set of activities the organisation undertakes in order to create a product or service
Highlights the important activities
Enables modeling the value generation of an organisation
The benefits of the Value Chain
Understanding which activities benefits customers and differentiate between useful and wasteful activities, and which activity generates the most value.
Applying VRIO analysis on value activities of the value chain
Analysis of cost and value of activities, and which activity cost must be reduced.
Value Systems
If value is added during each step, the overall value will be enhanced
If the organization is able to clearly map out the various value chain activities and appreciates the best way to optimize the linkages, this may result in a difficult to imitate sustainable competitive advantage
Competitive advantage is derived from both, specific activities and the ways these activities relate to each other
Implications
Value chain analysis enable the organisation to establish how effectively each activity is being performed including the use of qualitative and quantitative data collection regularly.
To judge their relative performance, organisations must seek to benchmark an activity or group of activities against a rival from the same industry known for high performance.
Branko Bajatovic Interview
System of value matrix
Capital expenditure projects are the vehicle to deliver change and competitive advantage