inputs into services and finish products.
Logistics/ Outbound: The warehousing and distribution of the finished goods.
Marketing and sales: Placing the product on the market generating sales reaching the right people interested to buy it
Service: The tool used to offer the product on the market and the service offered after the product is sold (customer service)
This Primary Activities are supported by:
The infrastructure of the firm: organisational structure, control system, company culture etc.
Human resource management: employee recruiting, hiring, training, development and compensation.
Technology development: technologies to support the value chain activity
Procurement: purchasing input such as materials, supplies, and equipments. (https://www.netmba.com/
strategy/value-chain/)
'The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation'. (https://www.netmba.com/strategy/value-chain/)
External efficiency is measured by customer satisfaction and by market share. To achieve customer satisfaction the company requires, and is depends on, the timely received goods and its services to specification by external suppliers. Is very important to have a good communication, and teamwork between suppliers at one end, and the customer at the other end of the value chain. (Wright and Race 2004)
Cost Advantage and Value Chain
A firm maybe create a cost advantage either by reducing the cost of individual value chain activities, or by reconfiguring the value chain. Once the value chain is defined, a cost analysis can be performed by assessing the costs of the value chain activities. The cost obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activity.
Porter identified 10 cost drivers realting to the value chain activities:
A firm develops a cost advantage by controlling these drivers better than do the competition.
A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration means structural changes such a new production process, new distribution channels, or a different sales approach. For example FedEx structurally redefined express freight service by acquiring its own planes and implementing a hub and spoke system.( https://www.netmba.com/strategy/value-chain/)
Differentiation and Value Chain
A differentiation advantage can arise from any part of the value chain. For example procurements of inputs that are unique and widely available for competitors can create differentiation, as can distributor channels that offers high service levels. A differentiation advantage may be achieved by changing individual value chan activities to increase uniqueness in the final product, or by reconfiguring the value chain.
Porter identified several drivers of uniqueness:
Policies and decision
Linkages among activities
Timing
Location
Interrelationships
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