Value chain
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Transcript of Value chain
The real strategic question isn’t how well you are doing today, but how you are doing against your
competitors.
Vijay Tandon on Value Chain Analysis @ UBS.
Prof. Vijay TandonDirector - PGDM/PGCMUniversal Business SchoolSubject - Strategic ManagementTopic - Value Chain Analysis
The greatest mistake managers make when evaluating their resources is failing to assess them
relative to competitors.
Value chain“PRIMARY ANALYTICAL TOOL OF STRATEGIC COST ANALYSIS”
Vijay Tandon on Value Chain Analysis @ UBS.
VALUE CHAIN ANALYSIS
Michael PorterVijay Tandon on Value Chain Analysis @ UBS.
Value Chain - Identifying ways
Create more customer value
Vijay Tandon on Value Chain Analysis @ UBS.
VALUE CHAIN ANALYSISAllows the firm to understand
Parts of its Operations
THAT CREATES VALUE
THOSE THAT DO NOT
Vijay Tandon on Value Chain Analysis @ UBS.
Firms earn above average returns only when the value it creates is greater than the costs incurred to create that VALUE
VALUE CHAIN ANALYSIS
WITHIN AROUND
MEANS OF DESCRIBING THE ACTIVITIES
RELATING THEM - COMPETITIVE STRENGTH
Vijay Tandon on Value Chain Analysis @ UBS.
Value Chain Analysis
Value it
creates greater
Costs incurred to create that
value
Firm earns above average returns
Vijay Tandon on Value Chain Analysis @ UBS.
VALUE CHAIN ANALYSIS
NINE STRATEGICALLY RELEVANT ACTIVITIES
Specific Business
VALUE
COST
Vijay Tandon on Value Chain Analysis @ UBS.
Chain of Value creating activities
DESIGN PRODUCE MARKET DELIVER SUPPORT
Every firm is a collection of activities
Vijay Tandon on Value Chain Analysis @ UBS.
Value chain segmentation - Activities
PRIMARY ACTIVITIES SUPPORT
ACTIVITIES
Vijay Tandon on Value Chain Analysis @ UBS.
PRIMARY ACTIVITIES INVOLVE
PHYSICAL CREATION SALES SERVICEDISTRIBUTION
1 2 3 4
Vijay Tandon on Value Chain Analysis @ UBS.
Value chain - Shows how a product moves from the raw-material stage to the final customer
VALUE CHAIN SEGMENTATION
PRIMARY ACTIVITIES(GROUPED - 5 MAIN
AREAS) SUPPORT ACTIVITIES(4 MAIN AREAS)
Vijay Tandon on Value Chain Analysis @ UBS.
Primary activities/Support
Activities - evaluated relative to competitors capabilities
Vijay Tandon on Value Chain Analysis @ UBS.
Superior Value Delivery Network
CUSTOMERSDISTRIBUTORSSUPPLIERS
Competitive advantage beyond its own operations
PRIMARY ACTIVITIES OF ORGANIZATION
KAM
MARKETING & SALES
OPERATIONS
INBOUND LOGISTICS
OUTBOUND LOGISTICS
SERVICE
34
25
1
Vijay Tandon on Value Chain Analysis @ UBS.
Primary activities
OPERATIONS Transform these various inputs in to final product service - Machining, Packaging, assembly, testing2
INBOUND LOGISTICS Receiving, storing & distributing - inputs to P/S Material handling, Stock control, Transport etc.1
OUTBOUND LOGISTICS Collect, Store & distribute the products to
customers (Ware housing, material handling) Service - Bringing customers to service
3
MARKETING & SALES Create awareness about the product Advertising, selling etc.4
SERVICE Enhance or maintain the value of a product or
service Installation, repair, training & spares
5
Vijay Tandon on Value Chain Analysis @ UBS.
SUPPORT ACTIVITIES
SUPPORT ACTIVITIES
Vijay Tandon on Value Chain Analysis @ UBS.
Support activities provides the assistance for the Primary activities to take place
SUPPORT ACTIVITIES
Process of acquiring various resource inputs to the primary activities
Systems of Planning Finance Quality control Information
management Structures & routine
Key technologies may be concerned directly with the
Product (R&D, Product Design)
Process (Process Development)
Resource (Raw material improvement)
Activities involved in
Recruiting Managing Training Developing Rewarding
PROCUREMENT TECHNOLOGY DEVELOPMENT HRM INFRASTRUCTURE
Superior Value Delivery Network
CUSTOMERSDISTRIBUTORSSUPPLIERS
Competitive advantage beyond its own operations
Vijay Tandon on Value Chain Analysis @ UBS.
VALUE CHAIN (MICHAEL PORTER)SUPPORT ACTIVITY 1
SUPPORT ACTIVITY 2
SUPPORT ACTIVITY 3
SUPPORT ACTIVITY 4
OPERATIONSINBOUND LOGISTICS
MARKETING & SALES
OUTBOUND LOGISTICS SERVICE
MARGIN
MAR
GIN
FIRM INFRASTRUCTURE (Gen. mgmt, planning, finance, legal.)
HUMAN RESOURCE MANAGEMENT (recruiting, hiring, training)
TECHNOLOGY DEVELOPMENT (Basic reserach, product design etc.)
PROCUREMENT (Activities completed to purchase the Inputs)
Receiving Storing Distributing Inputs – P/S Material
Handling Stock control Transport etc.
Transform inputs
Final product Or Service Machining Packaging Assembly Testing etc.
CollectStoreDistributeProduct to
customersWarehousing Transport etc.
AwarenessSales
administrationAdvertisingSelling
Enhance or maintain the value
Product/Service Installation Repair Training Spares
Vijay Tandon on Value Chain Analysis @ UBS.
All items should be evaluated relative to COMPETITORS CAPABILITIES
Apple Value Chain (Example)
To be a source of competitive advantage
Resource or Capability must allow the firmPerform activity - Provides superior values as compared to
competitorsPerform value creating activity - Competitors cannot perform
Vijay Tandon on Value Chain Analysis @ UBS.
