Value Chain is one of the process used in Business or in the companies to give the customer more value added Product or Service. This tool was first identified by Michel Porter of Harvard for identifying ways to create more customer value. According to this Every firm has the responsibility towards the synthesis of activities performed to design,produce,market,deliver and support its products. The value chain consists of nine specific activities which are needed for a company to give best of its value to the end user. These nine activities consists of two parts , Primary and Secondary. Primary Contains five activities and Secondary Consists of four activities.
The primary activities contains of internal activities that is Inbound Logistics. This is about bringing the Materials into the business,Converting them into final products, Shipping out final products, Marketing them and servicing them . And the secondary activities or Support activities are Procurement,Technology development, Human resource Management and firm Infrastructure all are handled by certain specialized departments.
The firms Main objective is to check with the costs and performance in each value creating activity and should look for different ways to improve it. The firm should estimate its competitors Value addition as well as their cost and performance so as to keep it as benchmark. Each department of the firm need to perform well in the core business processes , It Includes
Market Sensing Process: All the activities , such as of Market Intelligence, Disseminating it with in the organization and acting on the information.
New offering realization process: All the activities involved in researching and developing and launching of new high quality products.
Customer Acquisition Process: All the activities involved in the defining target markets and prospecting for new customers.
Customer relationship management process: All the activities involved in deeper understanding , relationships and offering to the individual customers.
Fulfillment Management Process: All the activities involved in receiving and approving orders , Shipping the goods on time, and collecting payment.
Strong companies develop superior capabilities in Managing their whole process so as to give value added products/services to the customer. They also re engineer the work flows and building cross functional teams for each responsible areas. To be successful each company should look into competitive advantages beyond its own operations into value chain of distributors, Suppliers, and Customers. Many companies are now in partnership with Suppliers and Distributors to create a superior value delivery network ,or a smoother Supply Chain.
Some of the great companies like Wal-Mart, Dell, Xerox have implemented it properly and become the successful companies in the globe. End of the day, its all about reaching the customer a value added product or service before the competitor reaches there.
About Author / Additional Info:
An MBA from GITAM University, India.