Home‎ > ‎3 pm class page‎ > ‎

Abundis,Mayra

Value Chain: Primary and Support Activities
 
Here is the link to Wikipedia: Value Chain
 
When one hears the term value chain, automatically some sort of linkage comes to mind. Well at least when I hear the word chain, I think of a union of things. In a sense, that is what value chain means. It is nothing more than a union between activities to make a finished good, in this case it is a business process followed to get the desired outcome, a product good for sale. To be more specific, value chain refers to a union of one actvity to another activity in the value chain. Value chains are one of three different models of business systems developed by Michael Porter. The other two include industry structure and competitive strategy. Value chains contribute a lot to firms, not only do they implement business strategies, but the analysis of the value chain itself gives companies a good overlook of every single step involved from the raw material to the making of the end product. 

Porter's Value Chain


The Value chain is divided into Primary Activities and Support Activities. Primary Activities include Inbound logistics, operations , outbound logistics, marketing and sales, and customer service. Inboun 
d logistics refers to the receiving of the raw materials necessary to make the product. The operation activity is the actual making of the product. The outbound logistic activity refers to the giving of the finished good to the customer. The marketing and selling activity refers to the actual selling of the product, through the usage of ads, commercials or any other source for marketing. Finally, the customer service activity refers to the customers and their feedback on the product itself. For an example of this we can take lets say a pair of boots. The chain value, or the process for making the pair of boots starts in the inbound logistics activity. Here is where the company receives the raw material for the making of the boots, lets say in this case they get the raw leather. The process then continues on to the operations activity. Here the pair of boots is actually assembled, its is put together and given a sole etc. The pair of boots now continues down the value chain into the outbound logistics activity, here it is when the pair of boots reaches the hands of the customer. From there, the marketing and selling activity follows. In this activity is where the selling of the pair of boots actually takes place. Finally the activity that closes the chain value is the customer service one. In  this activity is where the after sales service kicks in. If repairs or exchanges are needed it is in this activity where that all takes place. As we can see, as the product or the pair of boots goes down the value chain it gains more and more value. It starts off as a simple raw piece of material, and at the end we are left with a beautiful pair of boots. Now that we have seen what the roles of the primary activities are in the value chain, we can now go on and discuss what are the support activities. Support activities differ from primary activities in that unlike primary activities, support activities don't really deal with the process of making a raw material into a finished good, but it works indirectly with the production and sale of the good. Support activities are also the ones that make it possible for  primary activities to take place. Support activities include: firm infrastructure, human resources, technology development, and procurement.   Firm infrastructure is the culture of the company, how it is organized and the control systems it has. Human resources deals with everything employee wise, that is the training, recruitment, training and compensation of the people working in the firm. The other support activity, technology development refers to the new technologies used to support the activities. Procurement is just the purchasing of the raw materials needed for the making of the new product. 

                                                                                                                                                                                                                        

Intro to Value Chain


 
 
Now that we have a little more understanding of what value chain is, we can see it applied into a business process. The following video gives an example of Porter's model of value chain used in the real world scenario, it is from the company Regal Marine, a company that manufactures boats. In this video they explain in detail how the manufacturing of a boat goes through the primary activities, and how in the beginning a boat starts as a raw material, but as it goes down the chain it gains more value, and finishes off as a clean, nice boat ready for sale. We have to keep in mind that this couldn't have been possible if the support activities weren't involved. It is the responsibility of the support activities to make sure that the primary activities go through their processes as smooth as possible and without any problems. We also can't forget that the ultimate goal of a value chain is to develop the highest possible value, in this case the best possible boat, but yet achieving this by using the least possible cost.

 
Comments