There are opportunities for improvement in all organisations and all value chains. The problem is that all too often organisations (or at least the people that manage them) are reluctant to accept the principle of continuous improvement, or believe it applies only to other organisations with whom they interact and not themselves! Value chain analysis (VCA) is a DIAGNOSTIC TOOL that provides a mechanism for drawing the attention of different stakeholders to the opportunities for improvement at different stages in the value chain, and can be an effective catalyst for change.
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(University of Kent)
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Showing posts with label Value Chain. Show all posts
Showing posts with label Value Chain. Show all posts
Thursday, January 28, 2010
Sunday, November 22, 2009
The Value Network
Activities and linkages that add value do not stop at the organization’s boundaries.
A firm’s value chain is connected to other value chains in what J&S called a Value Network.
The Value Network is the set of inter-organizational links and relationships that are necessary to create a product or service.
Porter used the term Value System, Value Network is a better term since it emphasizes the interconnectedness of separate organizations.
It is possible to capture the benefit of some of the value generated both upstream and downstream in the value network:
(a) By vertical integration through acquisition of supplies and customers.
(b) Large and powerful companies can exercise less formal power over supplies and customers by using their bargaining power to achieve purchase and selling prices that are bias in their favor.
(c) A more subtle advantage is gained by fostering good relationships that can promote innovation and creation of knowledge.
Using the value chain, a firm can secure competitive advantage in several ways:
• Invent new or better ways to do activities.
• Combine activities in new or better ways.
• Manage the linkages in its own value chain.
• Manage the linkages in the value network.
(source: BPP Learning Media)
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A firm’s value chain is connected to other value chains in what J&S called a Value Network.
The Value Network is the set of inter-organizational links and relationships that are necessary to create a product or service.
Porter used the term Value System, Value Network is a better term since it emphasizes the interconnectedness of separate organizations.
It is possible to capture the benefit of some of the value generated both upstream and downstream in the value network:
(a) By vertical integration through acquisition of supplies and customers.
(b) Large and powerful companies can exercise less formal power over supplies and customers by using their bargaining power to achieve purchase and selling prices that are bias in their favor.
(c) A more subtle advantage is gained by fostering good relationships that can promote innovation and creation of knowledge.
Using the value chain, a firm can secure competitive advantage in several ways:
• Invent new or better ways to do activities.
• Combine activities in new or better ways.
• Manage the linkages in its own value chain.
• Manage the linkages in the value network.
(source: BPP Learning Media)
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Friday, November 20, 2009
The Value Chain Model explained
The Value Chain model is an excellent basic description of how an organization works.
(1) Primary Activities are directly related to production, sales, marketing, delivery and service.
(a) Inbound Logistics – Receiving, handling and storing inputs to the production system, warehousing, transport, stock control and so on.
(b) Operations – Converting resource inputs into a final product, resource inputs are not only materials. People are a resource, especially in service industries.
(c) Outbound Logistics – Storing the product and its distribution to customers: packing, testing, delivery and so on, for service industries, this activity may be more concerned with bringing customers to the place where the service is available, (example: front of house management in a theatre)
(d) Marketing and Sales – Inform customers about the product, persuading them to buy it and enabling them to so: advertising, promotion and so on.
(e) After Sales Service – Installing products, repairing them, upgrading them, providing spare parts and so forth.
(2) Support Activities provide purchased inputs, human resources, technology and infrastructural functions to support the primary activities:
(a) Procurement – All of the process involved in acquiring the resource inputs to the primary activities (eg purchases of materials, subcomponents equipment)
(b) Technology Development – Product design, improving processes and resource utilization.
(c) Human resource management – Recruiting, training, managing, developing and rewarding people, this activity takes place in all parts of the organization, not just in HRM department.
(d) Firm Infrastructure – Planning, finance, quality control, the structures and routines that make up the organization’s culture.
Linkages connect the activities of the value chain.
(a) Activities in the value chain affect one another. For example, more costly product design or better quality production might reduce the need for after-sales service.
(b) Linkages require coordination. For example, Just-in-time requires smooth functioning of operations, outbound logistics and service activities such as installation.
The Value Chain Concept is an important tool in analyzing the organization’s strategic capability. There are two important, connected aspects to this analysis:
(a) It enables managers to establish the activities that are particularly important in providing customers with the value they want: this may lead to consideration of where management attention and other resources are best applied, either to improve weakness or to further exploit strength. (for example decision about outsourcing)
(b) This analysis can be extended to include an assessment of the cost and benefits associated with various value activities.
The Value Chain, Core Competences and Outsourcing
The purpose of value chain analysis is to understand how the company creates value.
There is a clear link here with the idea of core competences : a core competence will enable the company to create value in a way that its competitors cannot imitate. These value activities are the basis of the company’s unique offering.
There is a strong case for examining the possibilities of outsourcing non-core activities so that management can concentrate on what company does best.
(source: BPP Learning Media)
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(1) Primary Activities are directly related to production, sales, marketing, delivery and service.
(a) Inbound Logistics – Receiving, handling and storing inputs to the production system, warehousing, transport, stock control and so on.
(b) Operations – Converting resource inputs into a final product, resource inputs are not only materials. People are a resource, especially in service industries.
(c) Outbound Logistics – Storing the product and its distribution to customers: packing, testing, delivery and so on, for service industries, this activity may be more concerned with bringing customers to the place where the service is available, (example: front of house management in a theatre)
(d) Marketing and Sales – Inform customers about the product, persuading them to buy it and enabling them to so: advertising, promotion and so on.
(e) After Sales Service – Installing products, repairing them, upgrading them, providing spare parts and so forth.
(2) Support Activities provide purchased inputs, human resources, technology and infrastructural functions to support the primary activities:
(a) Procurement – All of the process involved in acquiring the resource inputs to the primary activities (eg purchases of materials, subcomponents equipment)
(b) Technology Development – Product design, improving processes and resource utilization.
(c) Human resource management – Recruiting, training, managing, developing and rewarding people, this activity takes place in all parts of the organization, not just in HRM department.
(d) Firm Infrastructure – Planning, finance, quality control, the structures and routines that make up the organization’s culture.
Linkages connect the activities of the value chain.
(a) Activities in the value chain affect one another. For example, more costly product design or better quality production might reduce the need for after-sales service.
(b) Linkages require coordination. For example, Just-in-time requires smooth functioning of operations, outbound logistics and service activities such as installation.
The Value Chain Concept is an important tool in analyzing the organization’s strategic capability. There are two important, connected aspects to this analysis:
(a) It enables managers to establish the activities that are particularly important in providing customers with the value they want: this may lead to consideration of where management attention and other resources are best applied, either to improve weakness or to further exploit strength. (for example decision about outsourcing)
(b) This analysis can be extended to include an assessment of the cost and benefits associated with various value activities.
The Value Chain, Core Competences and Outsourcing
The purpose of value chain analysis is to understand how the company creates value.
There is a clear link here with the idea of core competences : a core competence will enable the company to create value in a way that its competitors cannot imitate. These value activities are the basis of the company’s unique offering.
There is a strong case for examining the possibilities of outsourcing non-core activities so that management can concentrate on what company does best.
(source: BPP Learning Media)
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Porter's Value Chain Model
Business Integration
1. Business integration means that all aspects of the business must be aligned to secure the most efficient use of the organization’s resources so that it can achieve its objectives efficiently.
2. Processes can be viewed as complete entities from initial order to final delivery.
Porter’s Value Chain Model
The value chain model
1. Shows how each activity adds to competitive advantage.
2. Emphasizes critical success factors within activities and for the value chain as a whole.
3. Considers support activities as well as primary activities.
4. Should emphasize linkages between activities.
5. Can be used to set and monitor targets for different activities to enable performance management of the overall process.
(source: BPP Learning Media)
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1. Business integration means that all aspects of the business must be aligned to secure the most efficient use of the organization’s resources so that it can achieve its objectives efficiently.
2. Processes can be viewed as complete entities from initial order to final delivery.
Porter’s Value Chain Model
The value chain model
1. Shows how each activity adds to competitive advantage.
2. Emphasizes critical success factors within activities and for the value chain as a whole.
3. Considers support activities as well as primary activities.
4. Should emphasize linkages between activities.
5. Can be used to set and monitor targets for different activities to enable performance management of the overall process.
(source: BPP Learning Media)
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