porter's value chain presentation 1
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Porter’s Value ChainBorn in 1947Harvard professorWrote book,
Competitive Advantage
Primary ActivitiesInbound LogisticsOperationsOutbound LogisticsMarketing and SalesService
Inbound LogisticsThe receiving and warehousing of raw
materialsDistribution of raw materials to
manufacturing and operations
OperationsProcess of transforming inputs into finished
goods and services
Outbound LogisticsWarehousing of finished goodsDistribution of those finished goods to
customers or retail stores
Marketing & SalesIdentification of customer needsDeploying product into marketplaceProcess of selling to customers
ServiceSupporting customers after they buy
products and services
Support ActivitiesProcurementTechnology DevelopmentHuman Resource ManagementFirm Infrastructure
ProcurementThe purchasing of raw materials and inputs
needed to create the product
Technology DevelopmentTechnology developments that support value
chain activities
Human Resource ManagementActivities associated with recruiting, training,
hiring, and compensation
Firm InfrastructureIncludes general and planning management,
legal, finance, accounting, public affairs, and quality management
Ex. A firm’s legal team consisting of lawyers to aid in lawsuits
Accounting department to keep track of financial figures
Why this mattersProfits depends on how well firms execute
these activities in the value chainFirms that excel in a value chain activity is
said to have a competitive advantageCompetitive advantage is gained through
cost advantage
Cost AdvantageReducing cost of individual value chain
activitiesReconfiguring the value chain
10 Costs Drivers of Each Value Chain Activity1. Economies of Scale2. Learning3. Capacity Utilization4. Linkages among activities5. Interrelationships among business units6. Degree of vertical integration7. Timing of market entry8. Firm’s policy of cost or differentiation9. Geographic location10.Institutional Factors (regulation, union
activity, taxes etc.)
Reconfiguring Value ChainStructural changes to an activity in a value
chain to reduce costs
The Bigger PictureFirm’s value chain is part of a bigger value
chainCompetitive advantage also depends on the
management of connections with other firms’ value chains
Citationshttp://www.12manage.com/methods_porter_v
alue_chain.htmlhttp://www.netmba.com/strategy/value-chain/http://en.wikipedia.org/wiki/
General_Motors_Chapter_11_reorganization