Hadi Satyagraha, Ph.D.

Value Chain

Building Blocks of Competitive Advantage

Customer Value Value Chain Generic Value Chain McKinsey Business System Core Process Model Primary Activities Support Activities Value Chain for Cost Advantage Value Chain for Differentiation Advantage

Topics

The purpose of all organizations Net benefits a customer derives from an

organization Experience a customer in relationship with

an organization 3 attributes:

◦ Physical◦ Relationship◦ Emotional appeal

Customer Value

Customer Value

A chain of inter-related activities, business processes in designing, producing, marketing, delivering and servicing a product or service

These chain of activities are the building blocks of competitive advantage

Each of these activities differ in importance in creating competitive advantage

Value Chain

Firm Infrastructure

Human Resource Technology

Procurement

InboundLogisticsOperationsOutbound

LogisticsMarketing

SalesServices

Profit/

Loss

Profit/

Loss

Primary Activities

Supp

ort A

ctiv

ities

Generic Value Chain

Technology

Product Design

Manufacturing

Marketing

Distribution

Service

McKinsey Business System

Product Development ProcessDemand Management Process

Customer Relationship Management

ControlSystems

InformationCapital HumanSupplier Customer

Core Processes

Material &InventoryControl System

Raw materialWarehousing

Supply ChainManegement

EquipmentProductivity

Automation

Productionand QualityControl

Plant Lay-outAnd Work Flow

Just-in-Time

Timeliness andEfficiency

Warehousing

Market research

Segmentation

Advertising

Channel

Motivation

Brand

Pricing

Customer Input

Complaint Handling

Warranty

Replacement Parts

Friendliness

Primary ActivitiesIn

BoundLogistic

s

Operations

Out Bound

Logistics

Marketing Service

Coordination

Public Image

Relationship w Policy Makers

Low cost Funds

New Product Capability

Select, Train, Retain

Labor Relations

Motivation and Satisfaction

Knowledge and Competence

IS Support

R&D Innovation

Lab Facilities

Quality of Scientists

Timeliness

Alternative Sources

Timeliness, Cost, Quality

Lease-versus- Purchase

Relationship w Suppliers

Support ActivitiesFirm

Infrastructure

HRM Technology

Procurement

ValueValue ActivitiesActivitiesIn Bound LogPurchasing

Price, location, quality, order size, relationship with suppliers

Cost DriversCost Drivers

R&D Size, design, new models

Price, location, quality, order size, relationship with suppliers

Manufacturing Scale, location, automation, wages, Capacity utilization Timah, CCS

Quality Control Quality targets, defects

Customer Supp Number of dealers, support level, repairs

Value Chain & Cost Advantage

ValueValue ActivitiesActivitiesIn Bound LogPurchasing

Differentiation DriversDifferentiation Drivers

TechnologyUnique features, fast product development: Harvard (case method), IPMI (CM, English)

Quality input, reliability of supply

Manufacturing Defects free, wide variety

Outbound Fast delivery, efficient order processing

Marketing Brand reputation: Coke, Unilever

Service Fast, reliable, friendly: CCS

Value Chain & Differentiation