1 introduction to strategic cost management · introduction to strategic cost management 3 111 (4)...

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1 Introduction to Strategic Cost Management

After studying this chapter, you will be able to:

Explain the role of Strategic Cost Management in supporting Strategy Development and

the Day-to-Day Operations of an organization

Distinguish Strategic Cost Management with Traditional Cost Management

TOPICS COVERED

Value chain analysis

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CHAPTER OVERVIEW

The Value Chain

The value chain is a linked set of Value-creating activities starting from basic raw material

sources or components suppliers throughto the ultimate end-use product or service delivered to

the customer. Co-ordinating the individual parts of the value chain together creates conditions to

improve customer satisfactions, particularly in terms of cost efficiency, quality and delivery. A

frim which performs the valu e chain activities more efficiently and at a lower cost, than its

competitions will gain competitive advantage.

The value chain was designed by professor Micheal Porter of the Harvard Business School

(1985).

PORTER’s VALUE CHAIN

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

Logistics

Operations

Outbound

Logistics

Marketing

& Sales

Service

It is necessary to understand how value chain activities are performed and he activities are not

just a collection of independent activities but a system of interdependent activities in which the

perofrmnce of one activity affect theperformance of other activites.

The activities which comprise the value chain are as follows: Primary activities

These are the activities which involve the physical movement of raw materials and finished

products, production of goods and services, marketing sales and subsequent services to output of

a business unit.

(1) Inbound Logistics:- which entail receiving, storing materials handling warehousing,

inventory control, vehicle scheduling returns to suppliers.

(2) Operations:- Which entail transferring inputs into final product form (e.g. maching,

packaging, assembly, equipment maintenance, testing, printing and facility operations).

(3) Outbound logistics:- Which entail distributing the finished product (e.g. finished goods

warehousing, material handling, operation of delivery vehicles, order processing and

shedulig).

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(4) Marketing and sales:- Which entail inducing and facilitating buyers to purchase the

product (e.g. advertising , activities of sales personnel, preparation of quotation, channel

selection, channel relations , pricing of goods and services).

(5) Service- which entails maintaining or enhancing the value of the product after the sale

has taken place (installation. Commissioning, repair, training, parts, supply and product

adjustment.)

Support activities:-

Support activites are those activities that provide support to the primary activities and also to

each other.

(i) Procurement - Which entails purchasing of raw materials , consumable items and capital

items.

(ii) Technology development- which entails the use of know how, procedures to be applied

and the technology inputs required in every activity which forms part of the value chain.

(iii) Human resource management –whhich entails the selection, retention and promotion of

staff, the appraisal of staff and performance-rewards linkage, management development

and employee relations.

(iv) Firm infrastructure:- which entails general management , accounting and fiancé ,

quality management and palnning activites.

Each activity within the value chain provides which after processing constitute added value to

the output, which the customer ultimately receives in the form of a product or service or as the

aggregate of values at the end of the value chain.

Each primary and support activity has the potential to contribute to the competitive advantage of

the business unit by enabling it to produce, market and deliver products or services which meet

or surpass the value expectations of purchasers in comparison with those resulting from other

value chains.

Focusing on each of the nine activities enables management to see how each creates value that

may be understood as the difference between cost and revenue.

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

Logistics

Operations

Outbound

Logistics

Marketing

& Sales

Service

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Act

ivit

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The value chain in non-manufacturing environments:-

Internal External

Strategy and administation R & D Design Prodcution Marketing Distribution Customer

Service customer

The value chain asserts that whilst excellence in manufacturing is essential for success, it is not

sufficient to guarantee success.

All business factors should still add value and can run consecutively and concurrently. Value can

also be added by the way in which these activites are linked.

(a) R&D- new ideas for products, services or processes

(b) Design- planning and engineering

(c) Prodcution – Co-ordinations and assembly of resources to produce a product.

(d) Marketing- teaching customers about products and persuading them to purchase

(e) Distrubution-delivery to customers

(f) Customer Service –support to customers

Creating Value

An Organisation is profitable if the realized value to customers exceeds the collective cost of

performing the activities.

(a) Customer Purchase Value:-Which they measure by comparing an organsiation

products and services with similar offerings by competitors.

(b) An organization creates value either by carrying out its activities more efficiently

than other organization or by combining them in such a way as to provide unique product

or service.We return to this point below.

Value –Chain Analysis

The value chain is the sequence of business functions by which a product is made progressively

more useful to customers Exhibit 1-2 shows six primary business functions:

Research and development (R&D), design of products and processes, production, amarketing,

distribution, and customer service We ittustrate tehse business functions with Sony

Coorporations television division.

1. Research & Development (R&D) generating and experimenting with ideas related to

new Sony this function includes research on alternative television products, sevices, or

processes. At Sony this function includes research on alternative television signal

transmission and on the picture quality f different shapes and thickness of television

screens.


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2. Design of products and processes- detailed planning, engineering and testing of

products and processes.Design at Sony includes deciding on the number of component

parts in a television set and determining the effect alternative product designs will have

on the set’s quality and manufacturing costs. Some representation of the value chain

collectively refer to the first two steps as technology development.

3. Prodcution: Procuring transporting and storing (“inbound logistics”) and coordinating

and assembling (“Operations”) resources to produce a product or del;iver a service. The

production of a Sony television set includes the procurement and assembly of the

electronic parts, the cabinet and the packaging used for shipping.

4. Marketing (including sales) Promoting an dselling products or services to customers

ot prospective customers .Sony markets its television aat tradeshows via advertisements

in newspapers and magazines on the internet and through its sales force.

5. Distirbution-processing orders and shipping products or services to customers (“Out-

buond logistics”) Distibution fo rSOny includes shipping to retial outlets, catalog

vendors, direct sales via the internet ands other channels through which customers

purchase new television.

6. Customer service:- Providing after-sales service to customers .Sony provides customer

service on its television in the form of customer help telephone lines, support on the

internet and warranty repair work.

In addition to the six primary business functions, Exhibhit 1-2 shows an administration function,

which includes accounting and fincance, human resource maangemnt, and information

technology and support the six priomary bsunes functions, When discussing the value chain in

subsequent chapters of the book, we include the administration function within the primary

functions. For example included in the marketing function is the function of analyzing reporting,

and accounting for resources management function of training frontline workers>Each of these

business functions is essential to companies satisfying their customners and keeping them

satisfied (and loyal) over time.

To implement their corporate strategies, companies such as Sony and Procter & Gamble us

eCustomer relationship management (CRM), a strategy that integrates people and technology in

all business functions to depnd relationship with customers, partners, and distributors CRM

initiatives use technology to coordinate all cusortmer facing activities (such as marketing, sales

calls, distribution, and after sales support) and the design and production activities necessary to

get products to customers.

Different companies create value in different ways. Low’s the ( home-improvement retailer)

does so by focusing on cost and efficiency .Toyota Motor company does so by focusing on

quality .Fast erspoense times at eBay create quality for the online auction giant’s customers,

whereas innovation is primarily what creates value for the customers of the biotech company

ROcheapparel company Gucci creates value for its customers by building a prestigious brand. A

a result at different times and in different industries, one or more fo these functions is more

critical than others.For example a company such as Roche-Genentech will emphasize R&D and

the design of producrs and processes. In contrast, a company such as Gucci will focus on

marketing, distribution and customer service to build its brand.

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Different parts if the value Chain:-

Admiistration Research &

Developemnt Design of Prodcution Marketing Distribution Customer

Product & Service

processes

Exhibit 1-2 depicts the usual order in which different business function activities physically ccur.

Do not however, interpret Exhibhit 1-2 to mean that maangers should proceed sequently through

the value chain when planning and managing their activities Companies gain (in terms of cost,

qialitu, and the speed with which new products are developed) if two or more of the individual

business functions of the value chain work concurrwently as a team. For example a company’s

production, marketing, disitrbution and customer service personnel can often reduce a

compnay’s total costs by providing input for design decisions.

Managers track the costs incurred in each value-chain category. Their goal is to reduce costs and

to improve efficiency. Management accounting information helps managers make cost-benefit

tradeoff. For example is it cheaper to buy products frm a vendor or produce them in-house? How

does investing resources in design and manufacturing reduce costs of marketing and customer

service?

Coverting resources: The value chain

The value chain models all the activities of business and the linkages between them. It hsows

how value is created, how costs are caused and how competitive advantage can be gained.

The value chain developed by Michel Porter offeres a bird’s eye view of the firm and what it

does. Competitive advantage, says Porter arises out of the way in which firms organize and

perform activites. Business are made up of value-creating activities, it is important to consider

the structure of an organization in terms of these activities.

The value chain is the sequence of business activities by which, in the perspective of the end-

user, value is added to the products or services produced by an entity.

Activities incur costs and, in combination with other activities, provide a product or service

which earns revenue.

Example of the Value Chain

A restaurant activites are buying cooking and serving food.The customer is prepared to pay more

than the cost of the resources (food, wages etc) The ultimate value created is the amount

customers are willing to pay above the cost of carrying out value activitotmers exceeds the cost

of activities.

(a) Customers purchase value, which they measure by comparing a firm;s products and

services with those of competitors.

(b) The business creates value by carrying out tuis activities either more efficiently than

other busoness, or combining them in such a way as to provide a unique product or

service.


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Linkages connect the activites of the value chain.

(a) Activiteis 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) Linkage require co-ordination, For example just-in-time (JIT) requires smooth

functioning of operations, outbound logistics and service activities such as installation.

Exam skills:-

The value chain provides a rational framewortk for carrying out analysis so is potentially useful

in exam question. At this level you should not expect to earn marks simply by reproducing the

value chain in a generic form, but rather you should expect to have to apply it to a scenario

situation.

Noneheless, the syllabous requires you to be able to produce an roganiosation value chain so it is

important you have a good understanding of the different activities included within it.

The value chain helps managers identify the activities which create value for an entity’s

customers. In doing so it can also help managers identify the key processes and areas in which

the entity has to perform successfully to secure a competitive advantage.

These key areas could be seen as the entity CSFs. It is important to note the potential link

betweeb this area of the syllabus and CSFs, performance targets and key perofrmnce indicators

as elements fo performance management (discusses in Chapter 11 of this syudy Text).

Similarly identifying the key processes can also have important implications for an

organizations’s imformation requirements-because managers will need information about how

the organization is performing in those key areas.

VALUE SYSTEM

Activiteis that add value to not stop at the organizations bourdries.For example when a restaurant

serves a meal, the quality of the meat and vegetable ingredientpplies them.The farmer has added

value.The farmers ability is as important to the customers ultimate satisfaction as the skills of the

chef. A firm;s value chain is connected to what Porter calls a value system

Supplier value chains

Customer value chains

Organisation;s value chain

Distributor value chains

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It may be possible to capture the benefit of some of the value generated both upstream and

downstream in the value system. An obvious way to do this is by vertical integration through the

acquisition of supplies and customers.

It is possible for large and powerful companies to exercise less formal power over suppliers and

customers by using their bargaining power to achieve favourable purchase and selling prices.

A more sybtle advantage is gained by fostering good relationship that can promote innovation

and the creation of knowledge. Businesses are increasingly looking to work together in

partnership with other members of their value system

USING THE VALUE CHAIN

A firm can secure competitive advatange by:

Invneting new or better ways to perfotm activities.

Combining activities in new or better ways.

Managing linkages in its own value chain to increase efficiency and reduce cost.

Managing the linkages in the value system .This links to the ideas of supply chain

management.

The value system offeres the potential to improve efficiency and reduce cost thourgh negotiation,

bargaining collaboration and vertical integration. Vertical integration offers the chance to

increase profitability by migrating to the part of the value system that has the most potential for

adding value.

Note also that information Technology (IT) can transform an organisation’s value chain, and a

number of improvements in organizations value chains have been the result of developments in

it.

We review the strategic significance of IT, including its impact on the value chain.


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Case Scenario

Question 2: ABC Ltd. is engaged in business of manufacturing branded readymade garments. It

has a singlemanufacturing facility at Ludhiana. Raw material is supplied by various suppliers.

Majority of its revenue comes from export to Euro Zone and US. To strengthen its position

further in the Global Market, it is planning to enhance quality and provide assurance through

long termwarranty.

For the coming years company has set objective to reduce the quality costs in each of the

primaryactivities in its value chain.

Required: STATE the primary activities as per Porter’s Value Chain Analysis in the value chain

of ABC Ltdwith brief description.

Industry Structure Analysis (Porter’s 5 forces analysis)

An industry might not yield high profits just because the industry is large or growing. The five

forces suggested by Porter’s play an important role in determining profit potential of the firms in

an industry.

Michael Porter developed a five factors model as a way to organise information about an

industry structure to evaluate its potential attractiveness.

Factors which influence profitability are:

Bargaining power of buyers: The bargaining power of buyers generally determines the

ability of buyer to push the price down. This happens when the buyers are concentrated

or when the volume purchased by buyers is very high. In other words, when the

bargaining power of buyers is high, they would be in a position to dictate terms to the

firm. A buyer also has higher bargaining power if the cost of switching suppliers is very

low. A higher bargaining power results in lower profitability. Large companies have a

high bargaining power when they buy from small suppliers.

Bargaining power of suppliers: The bargaining power of supplier is relatively higher

when the input is important to the buying firm or when there are very few suppliers of the

input. The suppliers could also dictate terms if the input supplied is not replaceable or

Rivalry among

existing

competitors

Bargaining

power of

suppliers

Threat of new

entrants

Bargaining

power of

buyers

Threat of substitute

products of services

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when an alternate input is not available. Microsoft dominates the operating system

business of computers and laptops and can dictate terms to its buyers as buyers do not

have multiple options to choose from. The profitability of companies can shrink if the

suppliers have a higher bargaining power.

Threat of substitute products or services: When multiple and close substitutes are

available in the market for a particular product, customers are likely to switch suppliers

easily. A firm in such a case must resort to competitive pricing to retain its customers.

When few substitutes exist for a product, consumers are willing to pay a potentially high

price. If close substitutes for a product exist, then there is a limit to what price customers

are willing to pay. The problem becomes severe if substitutes are available at much

cheaper price (case of launch of Reliance Jio). A company should strive to build its brand

and customer loyalty to thwart the threat of substitutes.

Substitutes could be from within the industry or from a different industry. The paper industry

faces threats from e-book market. When more people switch to public transport as trains, the

demand for vehicles comes down.

Threat of new entrants: The threat of new entrants largely depends on the barrier to

entry and perceived profitability in an industry. If an industry is profitable and the

barriers to entry are low, new firms could enter the industry leading to excess supplies

and reduced prices. Some examples of barriers to entry are intensive capital requirement,

sophisticated technology, legal factors, limited access to raw material & labour etc.

Industries which require huge amount of capital or sophisticated technical knowhow

might not have a high threat of new firms entering into the industry. Airline industry is a

case where very few new firms enter the business because of the capital requirements.

Another barrier to entry could be legislation which restricts newer firms to start the

business, like in the case of defense industry. Certain industries (for example medicines)

are largely driven by patents and new firms might find it difficult to enter the industry.

An industry where threat of new entrants is low is more profitable than an industry where

new entrants can easily enter the industry.

Intensity of competition/rivalry amongst firms: Some markets are more competitive

than others. In highly competitive industries, firms resort to cut-throat competition to win

more customers. The competitive rivalry is higher when an industry has high number of

firms and is lower when there are few large players dominating the market. The intensity

of competition is higher:

When firms are of more or less equal size.

Extra capacity exists in the industry

Difficulty in differentiation in the products.

High exit barriers - This is a case where the exit costs are high and hence firms must

continue in the industry despite excess capacity at industry level.

Higher fixed costs - Firms would want to produce as much as possible to keep the unit

costs low leading to surplus capacity.

Since these five forces are ever-changing, Porter’s framework needs to be employed as a

dynamic analytical tool. This is because competition is a dynamic process; equilibrium is never

reached and industry structures are constantly being reformed. The five forces analysis helps a


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firm to better understand the industry value chain and its competitive environment.

Core Competencies Analysis

Core Competency is a distinctive or unique skill or technological knowhow that creates

distinctive customer value. The core competency of Google is its capability to deliver excellent

search results which could not be imitated by its competitors. The core competencies are a

function of the collective skillset of people, organisation structure resources & technological

knowhow. A core competency is the primary source of an organisation’s competitive advantage.

The competitive advantage could result from cost leadership or product differentiation. There are

three tests useful for identifying a core competence.

Core competence

The loss of core competencies could be disaster for firms. Nokia was a leader in the feature

phones segment till smart phones were introduced. The changing dynamics of industry meant

that Nokia lost the top position in mobile phone industry and led to sale of the business to

Microsoft. Bajaj Auto, who had core competency in the scooter segment, lost traction when

motorbikes were introduced.

It is thus important that the firms continuously evolve their core competencies and remain

relevant in the ever-changing business environment.

Core competencies stem from two sources:

Resources: Resources are factors that enable a company to create value for customers. They can

be tangible (land, buildings, inventory, machinery, money etc) or intangible (employee’s skills,

brand, patent, technology etc.). The more difficult a resource is to imitate, the more valuable is

the resource for the company. The algorithms used by Google to deliver search results are not

easily imitated by competition. Similarly, the secret formula of concentrates used by soft drinks

manufacturers like Coca Cola are hard to copy.

Capabilities: Capabilities refer to the company’s ability to co-ordinate resources and put them to

productive use. Availability of resources by themselves does not guarantee core competency and

success. Capabilities stem from organisational structure, processes and control systems.

Applying the value chain approach to core competencies for competitive advantage includes the

following steps:

Validate core competencies in current businesses: Core competencies must lead to a

End product

benefits Difficult for

competitors to

imitate

Access to a wide

variety of

markets

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competitive advantage to the business and the existence of core competencies be

validated continuously.

Leverage competencies to the value chains of other existing businesses: A core

competency in one segment of business can be used in another existing/new business. An

excellent distribution network in one business can be used to launch another product.

Example - If a bank has wide network of branches in its banking business, the same

network can be used to launch and sell insurance products.

Use core competencies to reconfigure the value chains of existing businesses: While

firms may manage their existing value chains better than their competitors, sophisticated

firms work harder on using their core competencies to reconfigure the value chain to

improve payoffs.

Otherwise, competitors may exploit opportunities.

Value Shop Model or Service Value Chain

The concept of value shop came in to lime light holding the hand of Mr. James. D. Thompson in

the year of 1967. However, it took more than thirty years to name the concept as ‘Value shop’. In

1998

Mr. Charles B. Stabell and Mr. Oystein D. Fjeldstad in their research work properly defined the

concept of ‘Value Shop’. This concept aims to serve companies from service sector. In value

shop principle, no value addition takes place. It only deals with the problem, figure-out the main

area requires its service and finally comes with the solution. This approach is designed to solve

customer problems rather than creating value by producing output from an input of raw

materials. Value shops mobilizes resources (say: people, knowledge or money) to solve specific

problems such as curing an illness or delivering a solution to a business problem. The ‘problem’

could also be how to exploit an opportunity. The shop process is iterative, involving repeatedly

performing a generic set of activities until a solution is reached. This model applies best to

telecommunication companies, but also to insurance companies and banks, whose business

essentially is mediating between customers with different financial needs. The model has the

same support activities as Porter’s Value Chain but the primary activities are described

differently. In the value shop they are:

Problem finding and acquisition.

Problem solving.

Choosing among solutions.

Execution and control/evaluation.


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Infrastructure

Human-resource management

Technology development

procurement

The management in a value shop focuses on areas like problem and opportunity assessment,

resource mobilization, project management, solutions delivery, outcome measurement, and

learning.

Question 3: Classify the following business into primary and support activities under value

chain analysis.

(i) Material handling and warehousing.

(ii) Purchasing of raw materials, supplies and other consumables.

(iii) Order processing and distribution

(iv) Selection, placement and promotion of employees.

Answer:

Classification of Business activities into Primary and Support Activities

Sl. No. Business Activities Primary/support

(i) Material handling and warehousing Primary activities

(ii) Purchasing of raw materials, supplies and other

consumables.

Support activities

(iii) Order processing and distribution Primary activities

(iv) Selection, placement and promotion of employees. Support activities

Question 4: In Value Chain Analysis, business activities are classified into primary activities

and support activities. Classify the following under the more appropriate activity.

(i) Order processing and distribution

Problem finding and

Acquisition

Control/evaluation Execution Choice

Problem solving

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(ii) Installation, repair and parts replacement

(iii) Purchase of raw material and other consumable stores

(iv) Transforming inputs into final products

(v) Selection, promotion, appraisal and employee relations

(vi) Material handling and warehousing

(vii) General management, planning, finance, accounting

(viii) Communication, pricing and channel management

Answer

Activity Primary activity/

Support Activity

(i) Order processing and distribution Primary activity

(ii) Installation, repair and parts replacement Primary activity

(iii) Purchase of raw material and other consumable stores Support activity

(iv) Transforming inputs into final products Primary activity

(v) Selection, promotion, appraisal and employee relations Support activity

(vi) Material handling and warehousing Primary activity

(vii) General management, planning, finance, accounting Support activity

(viii) Communication, pricing and channel management Primary activity

Value chain analysis

Question 5: Examine the validity of following statements along with the reasons:

(i) The concepts, tools and techniques of value chain analysis apply only to all those

organizations which produce and sell a product.

(ii) Procurement activities are included in the primary activities as classified by Porter under

value chain analysis concept.

(iii) Value chain analysis in the strategic framework consists of single cost driver concept.

Solution:

(i) Invalid: the concepts, tools and techniques of value chain analysis apply to organizations

which produce and sell a product and also to organizations which provide a service.

(ii) Invalid: procurement activities are included in the support activities rather than primary

activities.

(iii) Invalid: Value chain analysis in the strategic framework consists of multiple cost drivers

concept. In value chain analysis, a set of unique cost drivers is identified for each value


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activity instead of single cost driver application at the overall firm level. Multiple cost

drivers may be classified into Structural drivers and Executional drivers.

Question 6: Which THREE of the following are forces within Porter’s Five Forces model?

(a) Threat of new entrants

(b) Demand conditions

(c) Power of buyers

(d) Threat of substitutes

(e) Political and legal

Answer:A, C, D

B is part of Porter’s Diamond model, while E is likely to be part of PEST analysis. The missing

forces are power of suppliers and rivalry amongst competitors.

Question 7: In Porter’s value chain which of the following is a support activity?

Operations

Marketing and Sales

After sales services

Procurement

Answer: The correct answer is Procurement

Inbound logistics; Marketing and sales; and services are all primary activities

The support activiiteis in Porter’s value chain are: Infrastructure; HRM; technology

development and Procurement.

Question 8:JJE makes and sells freshly baked bread. It has recently developed an automated

inventory control system for its finished loaves, which significantly reduces wastage.

Which one of the following Value Chain activities will JJE’s automated inventory system

directly improve?

A. Procurement

B. Outbound logistics

C. Operations

D. Inbound logistics

Solution: B

The system helps manage the mange the finished loaves, indicating that it refers to outbound

logistics. It does not manage the raw materials (or ingredients), indicating that it will not help

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inbound logistics. It also is used after JJE bakes the loaves of bread, so it cannot be part of

operations.

Question 9:QHQ is a law firm. It has recently undertaken an analysis of undertaken an analysis

of its activities, but is uncertain which activity relates to each part of the firm’s Value Chain.

Consider the following lists of activities within QHQ and various Value Chain classifications.

Activity Value chain classification

A Dealing with claims of negligence by

customers

1 Inbound logistics

B Attending court cases 2 Infrastructure

C Central control systems that ensure each case

is independently reviewed

3 Service

D Receiving and strong data from client

meetings

4 Operations

Identify which activity relates to each dimensions by pairing the appropriate letter and number

(e.g. A1, B2, etc).

Solution: A3, B4, C2, D1

Don’t forget that the value chain can apply to service industries as well as manufacturers. In this

case, the value chain tracks the movement of information through the firm – inputs from clients,

followed by the use of this during trials.

Question 10: which THREE of the following options are activities within the ‘value shop’

model?

A. Procurement

B. Choosing among solutions

C. Operations

D. Execution and control

E. Development of opportunities

Solution:A, B, D

A is correct as the value shop has the same secondary activities as the more common value chain

model. B and D are also stage of the value shop, along with problem solving and problem

finding and acquisition. C is primary activity of the value chain. E is not part of the value shop or

value chain.


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Question 11: Be-a-sport Ltd is a medium sized sports retailer. It currently operates three shops

in city centre locations. The management team have a very careful recruitment policy,; any

applicant must have a ‘passion for sport’.

Which one of the following would best describe the Value adding activity occurring at be- a-

sport?

A. Marketing

B. Operations

C. Outbound logistics

D. Human resource management

Solution: D

Human resource management looks at ensuring the right employees are selected and managed

throughout the company’s operations.

Question 12: Which THREE of the following are primary activities in Porter’s value chain?

A. Service

B. Infrastructure

C. Procurement

D. Marketing and sales

E. Technology development

F. Procurement

G. Operations

Solution:the correct answers are A, D and G

The other options are all secondary.

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