Analysis Of Porter 's Value Chain

The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)

One of Porter’s main contributions was Porter’s value chain. The value chain is all the activities an organization undertakes to create value for a customer. According to Porter, there are two ways to gain an edge over competitors. A firm must provide comparable but value but perform the activities on the chain at a lower cost, or; Perform services in a unique way

A value chain is an essential model for businesses that are trying to gain a competitive edge over their respective counterparts. “The purpose of the value chain is to sequentially link interdependent operational activities that create a value that exceeds the cost of producing or providing a product or service; thus creating a profit margin” (Porter, 1998). In order to measure and further develop the implemented value procedure, a value analysis should be conducted on the chain or system in place; solidifying it’s viability and potential profit growth. This methodology is not only recommended for profit-based businesses, but the same principle can be applied to a non-profit company.

5. Give an example of why it is important for different firms in the supply chain to coordinate logistics activities.

The basic principle in defining the value chain, according to Michael Porter (Porter, 1985), is that the activities include a variety of disaggregations from the below three perspectives. First, they have different economics, implying that these activities are functioning in different segments of the market. Second, even though the economics differentiation is not that evident, isolated activities should have a potential impact for it. Third, value-adding activities have significant input scale.

According to the value chain analysis, a business adds value to its products or services through a series of activities it performs within the company. First, the primary value activities describe the production, the selling, and after-sales support for its products and services. Second, the support value activities describe all business functions needed to provide the human resource, the technology, the infrastructure, and the supplies (Baltzan, 2012). EG Inc. coordinates all its value-adding activities using an MIS infrastructure, comprising of a supply chain management (SCM) system, customer relationship management (CRM) system, and enterprise resource planning (ERP) system, and as a result increases productivity, reduces cost, optimizes business operations, generates growth, and increases profitability (Baltzan,

Porter 's Value Chain is a chain of activities for a firm operating in a specific industry. According to Lynch (2003) it can defined as the links between key value adding activities and their interface with the support activities. The five primary activities namely inbound logistics, operations, outbound logistics, marketing and sales and service are more important in value adding process than support activities: firm infrastructure, human resources, technology development and procurement, so focus will be given to primary activities as they are crucial for distinguishing the strengths and weaknesses of Tesco 's performance.

Michael Porter published the Value Chain Analysis in 1985 as a response to criticism that his Five Forces framework lacked an implementation methodology that bridged the gap between internal capabilities and opportunities in the competitive landscape. This framework focused on industry attractiveness as a determinant of the profit potential of all companies within that particular industry. However, significant differences in performance exist between companies operating within the same industry that can be explained either by the company 's participation in a successful strategic group or by a firm 's specific competitive advantages.

This work in writing will define and describe the Value Chain Model of UPS and the use of the value chain model in identifying opportunities for information systems and the definition of the value web and its' relation to the value chain. This work will further describe how the value web assist business in identifying opportunities for strategic information systems and how the internet has changed competitive advantage.

In order to analyse the various types of activities which would help in the creation of competitive advantage he use of Porter’s Value Chain Analysis are done. The value chain analysis will help in order to perform two main activities such as primary & support activities. The primary activities in the value chain analysis takes into consideration inbound and outbound logistics, marketing and sales & after sales service. Whereas the support activities takes into consideration, procurement of raw materials, use of up to date technology, infrastructure of the firm & managing the resources. Both the activities in the value chain analysis are interlinked to one another. It shall be taken into consideration that, technology has been referred to

The Operations activity is best defined as the in-field operations and services provided by electricians and in-field crews. The operations activity is one in which the company is always working to develop new motivational tactics and installation techniques to improve efficiencies in the field. Ultimately, this is the single activity with the most contribution to the value chain. If the field crews and field installations lose efficiency, it has a direct negative impact to the rest of the value chain. Hence the reason why this is the area that the company spends much of their resources working to improve. The Outbound Logistics activity is made up of the project management group. The project managers are responsible for making sure that schedules are made to maintain an appropriate drive in efficiency, manage project budgets, and

Fulfillment, Production and Warehouse management processes are concerned with goods movement that triggers goods issue that will be further discussed.

Michael Porters (1998) value chain model addresses activities that create, deliver and support a company’s product or service and thus its overall position and competitive strength in the market for global competition shown in Fig. 1.

Above figure is retrieved from Standard Chartered Bank Value Chain, same as Porter’s value chain, it start with inbound logistics, operations, outbound logistics, marketing and sales and service. All of those are known as primary value chain. Next will be the support activities that consist of procurement, technological and development, human resources and infrastructure.

Thomas M. Idzorek, CFA Director of Research Ibbotson Associates 225 North Michigan Avenue Suite 700 Chicago, Illinois 60601-7676 312-616-1620 (Main) 312-616-0404 (Fax) tidzorek@ibbotson.com