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VALUE CHAIN, PRIMARY AND SUPPORT ACTIVITIES

What is Value Chain:

     In Michael Porter 's Competitive Advantage: Creating and Sustaining Superior Performance book, he introduced The Value chain first time in 1985. Value chain is a complexion of various activities in business progress in order to create product’s superior value, which is necessary for companies to dominate the market share.

     In general, Value chain is divided in  two parts, which are primary activities and support activities. Specifically, Porter categorized Value Chain into nine main functions to establish merits for company’s business progress. Supporting activities happen simultaneous in each primary activities.

     Value Chain is summarized in below picture ( which is from Wikipedia website).



  • Primary Activities:  Primary activities includes five activities
  1. Inbound Logistics: supporting activities for receiving input materials and equipments from suppliers such as reception, storage, inventory control, input transportation planning, quality control, supply chain management...

  2. Operation: design or customize product from raw materials such as printing, packaging, production control, quality control, design, equipment, production process...

  3. Outbound Logistics: focus on organizing activities for final products such as product warehousing, product transportation, distribution, shipping, delivery...

  4. Marketing & Sales: identify customer’s demand, boost sales channel and develop brand: market research, new product announcement, product price, placement, advertising, promotion...

  5. Service: support service after the customer buy goods: feedback from customers, provide information to customers, warranty, repair, returns...

              
  • Support Activities: Support activities includes four activities
  1. Firm Infrastructure: general management, planning management, legal, finance, accounting, marketing...

  2. Human Resource Management: to attract, retain and motivate employees. Examples of Human Resource Management activity are recruitment, retention, training, motivation, R&D...

  3. Technology Development: apply new technology in production, innovate, research and develop new product, improve packing, redesign printing, computer programmer...

  4. Procurement of Resources: support purchasing input resource with the low cost, such as purchasing raw materials, order control, manage relationships with suppliers, management of supply chain...


Why do companies need to utilize Value Chain?

           Well company’s value chain management aimed to operate cost effectiveness and produce services or products with different features or low cost – good quality products, that can help company building up a cost advantage over competitors on market. In addition, low cost products means the low cost is considered relatively with competitor ’s product cost, not the company’s lowest cost. In the other hand, if the company succeed in bringing its cost advantage off, it will be intangible and difficult for rivals to simulate. So,firm’s competitiveness increases dramatically, and then, company has stronger competitive advantages to approach in market than competitors.


Conclusion:

            In conclusion, management of the value chain is one of the most important essentials of an organization ’s competitive strategy. How well a firm implement and manage its value chain, will have more great conditions to create superior value in order to have competitive advantages, consequently, an organization can build an effective competitive strategy up. So, it can help achieving performance, satisfying and attracting customers, creating a powerful competitive advantage defense by providing buyer good quality product with a low prize.As a result, organization establishes a good reputation, strengthen the brand name, consolidates its image on the market, gains customer loyalty and raises the profit.


Summary video for Value Chain: 



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