Principles of Management Chapter 09

VALUE CHAIN • coordinated series or sequence of functional

activities necessary to transform inputs into finished goods or services customers value and want to buy

PRIMARY ACTIVITIES OF VALUE CHAINInbound Logistics - arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores

PRIMARY ACTIVITIES OF VALUE CHAINOperations - concerned with managing the process that converts inputs (in the forms of raw materials, labor, and energy) into outputs (in the form of goods and/or services)

PRIMARY ACTIVITIES OF VALUE CHAINOutbound Logistics - is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user

PRIMARY ACTIVITIES OF VALUE CHAINMarketing and Sales - selling a product or service and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

PRIMARY ACTIVITIES OF VALUE CHAINService - includes all the activities required to keep the product/service working effectively for the buyer after it is sold and delivered.

SUPPORT ACTIVITIESOF VALUE CHAINProcurement - the acquisition of goods, services or works from an outside external source

Human Resources Management - consists of all activities involved in recruiting, hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel.

SUPPORT ACTIVITIESOF VALUE CHAINTechnological Development - pertains to the equipment, hardware, software, procedures and technical knowledge brought to bear in the firm's transformation of inputs into outputs.

Firm Infrastructure - consists of activities such as accounting, legal, finance, control, public relations, quality assurance and general (strategic) management.

VALUE CHAIN MANAGEMENT (VCM)Value chain management (VCM) is a strategic business analysis tool used for the seamless integration and collaboration of value chain components and resources. It is development of a set of functional-level strategies that support a company’s business-level strategy and strengthen its competitive advantage

VALUE CHAIN MANAGEMENT (VCM)VCM was introduced in the mid-1980s by Michael Porter, a business strategy authority and longtime Harvard Business School professor. VCM has evolved into a universally applied business management strategy, and is a powerful strategic planning tool that extends from organizations to distribution and supply networks.

VCM COMPONENTS- Integrated chain strategy, planning and scheduling- An efficient supply chain- Full and interdependent chain resource management and optimization- Integrated customer insight data and information

FUNCTIONAL STRATEGIES FOR COMPETITIVE ADVANTAGE

FUNCTIONAL-LEVEL STRATEGY A plan of action to improve the ability of each of an organization’s departments to performs its task-specific activities in ways that add value to an organization’s goods and services

FUNCTIONAL ACTIVITIES AND VALUE CHAIN

PRODUCT DEVELOPMENT Engineering and scientific research activities involved in innovating new or improved products that add value to a product

-Marketing function’s task is to persuade customers a product meets their needs and convince them to buy it

MATERIALS MANAGEMENT FUNCTION Controls the movement of physical materials from the procurement of inputs through production and into distribution and delivery to the customer

PRODUCTION FUNCTION Responsible for the creation, assembly or provision of a good or service, for transforming inputs into outputs

SALES FUNCTION Plays a crucial role in locating customers and then informing and persuading them to buy the company’s products

CUSTOMER SERVICE FUNCTION Provides after sales service and support

Can create a perception of superior value by solving customer problems and supporting customers

IMPROVING RESPONSIVENESS TO CUSTOMERSGood value-chain management requires marketing managers to focus on defining the company business in terms of customer needs/wants

What the customer wants?1. A lower price to a higher price2. High-quality products3. Quick service and good after-sales service4. Products with many useful or valuable

features5. Products that are tailored to their unique

needs

IMPROVING QUALITYAn organization able to provide, for the same price, a product of higher quality than a competitor’s product is serving customers better

Higher product quality can increase efficiency

TOTAL QUALITY MANAGEMENTFocuses on improving the quality of an organization’s products and stresses that all of an organization’s value-chain activities should be directed toward this goal

STEPS TO SUCCESSFUL TQM IMPLEMENTATION1. Build organizational commitment to quality

2. Focus on the customer

3. Find ways to measure quality

4. Set goals and create incentives

5. Solicit input from employees

6. Identify defects and trace to source.

7. Introduce just-in-time (JIT) inventory systems.

8. Work closely with suppliers.

9. Design for ease of production.

10. Break down barriers between functions.

VALUE CHAIN ANALYSISFocuses on how a business creates customer value by examining contributions of different internal activities to that value

Divides a business into a set of activities within the business

• Starts with inputs a firm receives• Finishes with firm’s products or services and after-sales

service to customers

Allows for better identification of a firm’s strengths and weaknesses since the business is viewed as a process

SWOT ANALYSISSWOT analysis (alternatively SWOT matrix) is an acronym for strengths, weaknesses, opportunities, and threats—and is a structured planning method that evaluates those four elements of a project or business venture

INTERNAL ANALYSISMaking Meaningful Comparisons

REFERENCES• Contemporary Management 5th ed - Gareth Jones & Jennifer

George• Techopedia Inc..

• https://www.techopedia.com/definition/23858/value-chain-management-vcm

• Michael Porter and Value Chain• https://en.wikipedia.org/wiki/Value_chain