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The real strategic question isnt 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 AnalysisThe greatest mistake managers make when evaluating their resources is failing to assess them relative to competitors.

Value chainPRIMARY ANALYTICAL TOOL OF STRATEGIC COST ANALYSISVijay Tandon on Value Chain Analysis @ UBS.

VALUE CHAIN ANALYSISMichael Porter

Vijay Tandon on Value Chain Analysis @ UBS.

Value Chain - Identifying waysCreate more customer value

Vijay Tandon on Value Chain Analysis @ UBS.

VALUE CHAIN ANALYSIS

Allows the firm to understandParts 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

WITHINAROUNDMEANS OF DESCRIBING THE ACTIVITIES

RELATING THEM - COMPETITIVE STRENGTH

Vijay Tandon on Value Chain Analysis @ UBS.

Value Chain Analysis

Firm earns above average returns

Vijay Tandon on Value Chain Analysis @ UBS.

VALUE CHAIN ANALYSIS

NINE STRATEGICALLY RELEVANT ACTIVITIESVijay Tandon on Value Chain Analysis @ UBS.

Chain of Value creating activitiesDESIGNPRODUCEMARKETDELIVERSUPPORTEvery firm is a collection of activities

Vijay Tandon on Value Chain Analysis @ UBS.

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Value chain segmentation - Activities

Vijay Tandon on Value Chain Analysis @ UBS.

PRIMARY ACTIVITIES INVOLVEPHYSICAL CREATIONSALESSERVICEDISTRIBUTION

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

Vijay Tandon on Value Chain Analysis @ UBS.

Primary activities/SupportActivities - evaluated relative to competitors capabilities

Vijay Tandon on Value Chain Analysis @ UBS.

Superior Value Delivery Network

Competitive advantage beyond its own operations

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PRIMARY ACTIVITIES OF ORGANIZATION

KAMMARKETING & SALESOPERATIONSINBOUND LOGISTICSOUTBOUND LOGISTICSSERVICE34251Vijay Tandon on Value Chain Analysis @ UBS.

Primary activitiesOPERATIONSTransform these various inputs in to final product service - Machining, Packaging, assembly, testing2INBOUND LOGISTICSReceiving, storing & distributing - inputs to P/SMaterial handling, Stock control, Transport etc.1OUTBOUND LOGISTICSCollect, Store & distribute the products to customers (Ware housing, material handling)Service - Bringing customers to service3MARKETING & SALESCreate awareness about the productAdvertising, selling etc.4SERVICEEnhance or maintain the value of a product or serviceInstallation, repair, training & spares5Vijay Tandon on Value Chain Analysis @ UBS.

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INFRASTRUCTURESUPPORT ACTIVITIES

PROCUREMENT

TECHNOLOGY DEV

HRMSUPPORT ACTIVITIESVijay Tandon on Value Chain Analysis @ UBS.

Support activities provides the assistance for the Primary activities to take place

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SUPPORT ACTIVITIESProcess of acquiring various resource inputs to the primary activitiesSystems of PlanningFinanceQuality controlInformation managementStructures & routineKey technologies may be concerned directly with theProduct (R&D, Product Design)Process (Process Development)Resource (Raw material improvement)Activities involved inRecruitingManagingTrainingDevelopingRewardingPROCUREMENTTECHNOLOGY DEVELOPMENTHRMINFRASTRUCTURE

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Superior Value Delivery Network

Competitive advantage beyond its own operationsVijay Tandon on Value Chain Analysis @ UBS.

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VALUE CHAIN (MICHAEL PORTER)SUPPORT ACTIVITY 1SUPPORT ACTIVITY 2SUPPORT ACTIVITY 3SUPPORT ACTIVITY 4OPERATIONSINBOUND LOGISTICSMARKETING & SALESOUTBOUND LOGISTICSSERVICE

MARGINMARGINFIRM 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

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Apple Value Chain (Example)

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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.