...VALUE CHAIN ANALYSIS A) Discussion of the core elements of a value chain. (8 marks) B) Explanation of why an understanding of these elements is so important in managing costs and gaining or sustaining competitive advantage. Establish all important linkages in your answer. (12 marks) The value chain analysis is a useful tool for defining a firm’s core competencies and the activities in which it can pursue a competitive advantage. The core elements of a value chain analysis are the primary and secondary activities and cost. Companies use these primary and support activities as "building blocks" to create a valuable product or service. The Primary activities relate directly to the physical creation, sale, maintenance and support of a product or service. The primary activity and cost is where the value for customers and their purchasing decisions are directly influence and created by these functions. These activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Inbound logistics: For the production and development activities, organizations need inputs as goods which are received from the suppliers. Inbound logistics refer to all the activities related to receive goods from the suppliers, decision about the transportation scheduling, storing the goods as inventory, managing the inventory, and make the inputs ready to use for the production of end products. Operations: Operation is the process of transforming input activities...
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...their businesses. In order to remain at the fore front in the current dynamic world, then an organization should adopt the various application of information technology. This will put the organization at the forefront in terms of innovation as well as give the organization a competitive advantage (Hitt & Robert, 2011, p.10). Value chain analysis is a model that was developed by Michael Porter to help an organization develop a strategy for its organization. Michael porter suggested that organization activities can be grouped into two major categories which include the following; primary and support activities. Primary activities are those activities that are geared towards the creation and delivering of a product. Examples of primary activities include component assembly (Schmitz, 2005, p.20). Support activities on the other hand are not directly related to the production of a product or service. Such activities are those activities that can increase the efficiency or effectiveness within a business. For example, human resource management is an example of support activities. This essay is going to evaluate the process of value chain analysis and its application in the following two companies; Netflix and Redbox companies. 2.0 Background information. Netflix is an online movie streaming and email DVD Company. The company offers consumers a chance to stream live various movies over the internet. In order to use Netflix, consumers are required to register on the company’s...
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...1. “Value chain analysis (VCA) is a process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation.” 2. “Value chain represents the internal activities a firm engages in when transforming inputs into outputs.” Understanding the tool VCA is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage. In other words, by looking into internal activities, the analysis reveals where a firm’s competitive advantages or disadvantages are. The firm that competes through differentiation advantage will try to perform its activities better than competitors would do. If it competes through cost advantage, it will try to perform internal activities at lower costs than competitors would do. When a company is capable of producing goods at lower costs than the market price or to provide superior products, it earns profits. M. Porter introduced the generic value chain model in 1985. Value chain represents all the internal activities a firm engages in to produce goods and services. VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly. Below you can see the Porter’s VC model. Primary Activities | ...
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...Literature Review – Value Chains By Yvonne Chen For GWU IDS Capstone 2012 September 2, 2011 Abstract This paper offers a review of the literature on the theoretical underpinnings and practical uses of GVC value chain governance theory for the purposes of informing a development-focused graduate student consulting project that employs GVC methodology. The first and second sections provide a brief overview of value chains, GVC governance theory and the relevant concepts for conducting a value chain analysis within a development context. The third section discusses GVC interventions and offers a case study of a successful intervention. At the end of this paper, the author offers a set of recommendations for a graduate level development capstone project that would focus on value chains. Introduction In today’s globalized world, the traditional concepts that were useful to understanding global integration such as comparative advantage and the role of multinational corporations in shaping trade and investment are no longer sufficient. That is, these concepts do not account for the fragmentation in the value chain or the fast-rising capabilities in places that are new to the capitalist global economy such as China, India, Russia and Vietnam. Since the early 2000s, a new framework - global value chain governance theory - seeks to understand the economic interests, social structures and competition and strategy that advance or obstruct productivity. This paper offers a review...
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...Value Chain Analysis M. Porter introduced the generic value chain model in 1985. Value chain represents all the internal activities a firm engages in to produce goods and services. VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly. Michael Porter published the Value Chain Analysis in 1985 as a response to criticism that his Five Forces framework lacked an implementation methodology that bridged the gap between internal capabilities and opportunities in the competitive landscape. This framework focused on industry attractiveness as a determinant of the profit potential of all companies within that particular industry. However, significant differences in performance exist between companies operating within the same industry that can be explained either by the company's participation in a successful strategic group or by a firm's specific competitive advantages. THE VALUE CHAIN DEFINED The idea of a value chain was first suggested by Michael Porter (1985) to depict how customer value accumulates along a chain of activities that lead to an end product or service. Porter describes the value chain as the internal processes or activities a company performs “to design, produce, market, deliver and support its product.” He further states that “a firm’s value chain and the way it performs individual activities are a reflection of its history, its strategy, its approach to implementing its strategy, and the underlying...
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...CA is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage. In other words, by looking into internal activities, the analysis reveals where a firm’s competitive advantages or disadvantages are. The firm that competes through differentiation advantage will try to perform its activities better than competitors would do. If it competes through cost advantage, it will try to perform internal activities at lower costs than competitors would do. When a company is capable of producing goods at lower costs than the market price or to provide superior products, it earns profits. M. Porter introduced the generic value chain model in 1985. Value chain represents all the internal activities a firm engages in to produce goods and services. VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly. Although, primary activities add value directly to the production process, they are not necessarily more important than support activities. Nowadays, competitive advantage mainly derives from technological improvements or innovations in business models or processes. Therefore, such support activities as ‘information systems’, ‘R&D’ or ‘general management’ are usually the most important source of differentiation advantage...
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...Value chain is the link between key value adding activities and interface with support activities (Lynch 2003). According to Audretsch (1995), value chain is a useful evaluation tool to make a distinction between advantages and disadvantages during value adding processes. The main purpose of applying the value chain framework is to maximize value creation, while minimizing total costs. Many financial users may prefer acquiring information about the value of Tesco’s costs. In some circumstances, many essential data could be hidden and may not be able be presented in financial statements. As a result, by applying this method it can analyse strategic planning of Tesco from previous years. Porter (1985) said that business activities could be divided into two main parts，supportive activities and primary activities. The former includes firm infrastructure, human resource management, technology development and procurement. The later includes inbound logistics, operations, marketing, sales and service. Primary activities: Operation: The operation within Tesco before 8 April 2013 was in fact only had one way that products sent to local stores and customers buy it in store, however after that day, Tesco has launched its online grocery shopping service for all customers in Bangkok (Tesco2013). “With our wide product range and great service proposition we are confident that Tesco Lotus online shopping will receive an overwhelming response from customers”, said Tesco Lotus CEO John Christie...
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...The Value Chain Analysis – Support activities and Value Chain System The Value Chain System The firm's value chain links to the value chains of upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on the firm-specific value chain, but also on the value system of which the firm is a part. A firm's value chain is part of a larger system that includes the value chains of upstream suppliers and downstream channels and customers. Porter calls this series of value chains the value system, shown conceptually below: The Value System ... | > | Supplier Value Chain | > | Firm Value Chain | > | Channel Value Chain | > | Buyer Value Chain | Linkages exist not only in a firm's value chain, but also between value chains. While a firm exhibiting a high degree of vertical integration is poised to better coordinate upstream and downstream activities, a firm having a lesser degree of vertical integration nonetheless can forge agreements with suppliers and channel partners to achieve better coordination. For example, an auto manufacturer may have its suppliers set up facilities in close proximity in order to minimize transport costs and reduce parts inventories. Clearly, a firm's success in developing and sustaining a competitive advantage depends not only on its own value chain, but on its ability to manage the value system of which it is a...
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...Integrated Essay: Value Chain Analysis Introduction The purpose of this essay is to analyze the strength and weakness of the value chain for the Department of Veteran Affairs Supply (Value) Chain. Core Concepts The objective of this analysis of the Department of Veteran Affairs Supply (Value) Chain is to provide clear and concise identification of strengths and weaknesses (internal) opposed to opportunities and threats (external) (SWOT) critical to the viability of the value (supply) chain. Porter’s Generic Value Chain is the model for the analysis that identifies information, value-adding activities, e.g., primary activities, inbound logistics, and outbound logistics within the larger value system. The value-added to the value chain is the support services increase the efficiency of current Veterans Affairs supply chain. The data captures analytics requirements for informed decision; the results will be propagated as research. Analysis Analyzing the Department of Veteran Affairs Supply (Value) Chain one must consider core concepts, the value chain, value-generating activities and feasibility of the supply chain. The management of key VA organizations and contractors are vital to sustainability of the integrated enterprise supply (value) chain. According to Porter (1985) “Value chain is the analysis of a business as a chain of activities that transform inputs into outputs that creates value for customers. For analyzing the sources of competitive...
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...Papers on Value chain analysis; Reports on Different Companies The article focuses on the main aspects of Value chain analysis. The activities entailed in the framework are discussed in detail, with respect to competitive strategies and value to the customer. The article includes tips for students and analysts on how to write a good Value chain analysis for a firm. Moreover, sources of findings information for value chain analysis have been discussed. The limitations of Value Chain analysis as a model have also been discussed. Introduction The value chain approach was developed by Michael Porter in the 1980s in his book “Competitive Advantage: Creating and Sustaining Superior Performance” (Porter, 1985). The concept of value added, in the form of the value chain, can be utilised to develop an organisation’s sustainable competitive advantage in the business arena of the 21st C. All organisations consist of activities that link together to develop the value of the business, and together these activities form the organisation’s value chain. Such activities may include purchasing activities, manufacturing the products, distribution and marketing of the company’s products and activities (Lynch, 2003). The value chain framework has been used as a powerful analysis tool for the strategic planning of an organisation for nearly two decades. The aim of the value chain framework is to maximise value creation while minimising costs (www.wikipedia.org). Main aspects of Value Chain Analysis ...
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...Number words in essay:1755 'LAGENFURT PUB' Five forces and the Value chain analysis. Abstract The purpose of this essay is to present business decisions and strategies through analysing external environment and internal competencies based on Michael Porter's Five force and Value chain models. The Fife force model include: threat of entry, threat of substitutes, power of buyers, power of suppliers, competitive rivalry. Future content includes determining Potter's Value of chain, which are primary activities: inbound logistic,operations, outbound logistic, marketing and sales, service and support activities: firm infrastructure, human resource management, technology development, procurement. Those two models are present to rebuild and develop falling family business, called the 'Lagenfurt Pub' located in old town in Gdansk, belong to my old friend. Introduction This essay will indicate the exemplification Porter's Five forces and Value chain models in business, as well in which way implementation of those two models can successfully develop organisation strategy. A fictitious business, named the 'Lagenfurt Pub' is the example of business in which Porter's two models will be implemented. The 'Lagenfurt Pub' is family business running over 35 years, old business habits, did not spot the modern market tendency and clients expectations leaded this pub to almost closing down. The 'Lagenfurt Pub' offers products as a beers, spirits, meals. The...
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...How to write a Good Value Chain Analysis The ability of a company to understand its own capabilities and the needs of the customers is crucial for a competitive strategy to be successful. The profitability of a firm depends to a large extent on how effectively it manages the various activities in the value chain, such that the price that the customer is willing to pay for the company’s products and services exceeds the relative costs of the value chain activities. It is important to bear in mind that while the value chain analysis may appear as simple in theory, it is quite time-consuming in practice. The logic and validity of the proven technique of value chain analysis has been rigorously tested, therefore, it does not require the user to have the same in-depth knowledge as the originator of the model (Macmillan et al, 2000). The first step in conducting the value chain analysis is to break down the key activities of the company according to the activities entailed in the framework. The next step is to assess the potential for adding value through the means of cost advantage or differentiation. Finally, it is imperative for the analyst to determine strategies that focus on those activities that would enable the company to attain sustainable competitive advantage. It is important for analysts to remember to use the value chain as a simple checklist to analyse each activity in the business with some depth (Pearson, 1999). The value chain should be analysed with the core competence...
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...Developed by Michael Porter , Value Chain Analysis is an analytical framework that is used to analyse relationships between various parts of operations and the manner in which each part adds value to contribute to the level of revenues. Value Chain Analysis the business activities are divided into two categories: primary activities and support activities. The primary activities directly deal with the creation of products or services, whereas, support activities can be used to obtain or increase competitive edge in the marketplace. Primary activities: Inbound logistics; Operations; Outbound logistics; Marketing and sales; Service. Support activities: Infrastructure activities; Technology; Human resource management and development. Let us see Pacific Coffee. Pacific Coffee Company is a Pacific Northwest U.S-.style coffee shop group originating from Hong Kong, with a few outlets in China, Singapore and Malaysia. Primary activities Inbound logistics. Pacific Coffee inbound logistics involve company agents choosing coffee beans producers mainly in African continent, South and middle America, Hawaii and Asia ,communication the standards related to the quality of coffee beans, establishing strategic relationships with suppliers and organizing the supply-chain management. Operations. Pacific Coffee operations are conducted mainly in Hong Kong, Macau , Mainland China, Singapore and Malaysia with stores over 130 in two ways :direct operations of the stores by the...
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...Value Chain Analysis United Technology Aerospace Systems Value Chain Analysis United Technology Aerospace Systems United Technologies Corporation (UTC) is a multinational conglomerate organization that covers aerospace, building, and industrial systems, with over $64B in net sales (Our business at a glance, 2014). Each business is a “separate” company under the UTC these business entities are: Sikorsky, UTC Building and Industrial systems (Carrier, Otis Elevators, Kidde), and UTC Propulsion and Aerospace System (Pratt & Whitney, UTC Aerospace Systems [UTAS]). The company that I am selecting to use for the Sustainable Solutions Paper is UTC Aerospace Systems (UTAS), which is a subsidiary of the UTC with $13.3B in sales (Our business at a glance, 2014). It is a comprised of several different acquired businesses Hamilton Sundstrand and Goodrich. UTAS is a larger supplier to commercial and engine and airframe manufacturers. UTAS uses a just in time (JIT) inventory model; therefore, a disruption in the supply chain can have catastrophic effects on cost and schedule of a particular product line. The core business of UTAS depends upon its value chain, to ensure that it not only maintains a competitive edge, but that it is able to increase the amount of profit from their products. The value chain which consists of marketing, logistics, productions (or operations), aftermarket, which is similar to Porter (1985) concepts. Effectively, value chain...
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...Introduction 8 2. Value chain analysis 9 2.1. The general value chain concept 9 2.2. The value chain concept applied to fisheries and aquaculture 11 2.3. Conclusions about using the value chain analysis 14 3. The international seafood industry and Africa’s place in it 16 3.1. African seafood exports and imports 18 3.2. Main destinations 20 3.3. Imports 21 3.4. Value addition in Africa 21 4. Studies where value chain analysis has been used 22 4.1. Revenue distribution through the seafood value chain 23 4.2. Lake Victoria Nile perch fishery, Tanzania 25 4.3. Pelagic fishery in Morocco 32 4.4. Value addition opportunities in the Namibian seafood industry 38 4.5. Ugandan Nile perch quality management and certification 41 4.6. The Kenya capture fisheries value chain 45 4.7. Nigerian domestic catfish production 50 4.8. Gender analysis of aquaculture value chain in Nigeria and Vietnam 54 4.9. Private sector applications of value chain analysis 60 5. On-going value chain analysis studies 68 5.1. Value chain analysis of international fish trade and food security 68 5.2. Ghana: Value Chain and Cost Earnings Analysis 69 6. Example from Asia: Analysis of the fishery sector in Sri Lanka 70 6.1. Value chain summary 71 6.2. Production 71 6.3. Ownership and collective action 72 6.4. Fisheries value chain structure and dynamics 74 6.5. Value chain participants 76 6.6. Supporting markets 77 6.7. Inter-firm linkages 78 6.8. Value chain governance and...
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