Skip to main content

Porter's Value Chain Model

Michael Porter devised the model of the value chain to describe the flow of value from producers to consumers. This model also makes clear that there are many points of intermediation along the value change within and between companies collaborating in these networks required for production and distribution.

For most business enterprises, there are two broad categories of value activities (figure 1.13): 
  1. Primary Activities: The former includes activities connected with the physical creation of the firm's product or service, its marketing and delivery, and provision of after-sale support. Based on technological and strategic distinctness, the primary activities are generally divisible into five basic categories as follows: 
    • i) Inbound Logistics: These are activities associated with procurement, storage, and flow of inputs to the product, like material handling, warehousing, inventory control, vehicle scheduling and returns to suppliers. 
    • ii) Operations: Activities involved in the transformation of inputs into final product, like machining, assembly, packaging, equipment maintenance, testing, and facility operation belong to this category.
    • iii) Outbound Logistics: These include activities, which are associated with collection, storage and physical distribution of finished goods to the customers, such as storage/warehousing of finished goods, order processing, scheduling deliveries, operation of delivery vehicles. 
    • iv) Marketing and Sales: This category includes activities such as advertising, sales promotion, sales force management, channel selection, channel relations, and pricing. 
    • v) Service: These are activities aimed at providing service to enhance or maintain the value of the product, like installation, repair, training, supply of parts and product adjustment.
  2. Support Activities: The support activities are those, which provide inputs or infrastructure for primary activities to be performed. Support activities, which provide the infrastructure for primary activities, are also .required to be identified by isolating them on the basis of technological and strategic distinctiveness. Four categories of support activities are generally distinguished as follows: 
    • i) Procurement: Procurement activities which include purchase of materials and service inputs, cquipment and machinery etc., pervade all other activities in the value-chain, for every activity needs to use purchased inputs of some kind. 
    • ii) Technology Development: Technology involved in product designing and manufacturing processes require activities to be performed for perfection and upgradation. Thus, technology development includes activities related with creating and improving the way in which various activities in the value chain are performed. 
    • iii) Human Resource Management: Management of human resources - recruitment, training and development of Manpower- is involved in each and every activity in the value chain, and they constitute a distinct set of support activities.
    • iv) Firm Infrastructure: Quite distinct from the specific primary or support activities but essential to the entire chain of value activities are those activities that provide the infrastructure of the firm as a whole. They relate to general management, accounting and finance, legal affairs, strategic planning, etc.

Labels:

Comments

Post a Comment

Popular Post

Competitive Advantage - Sustainable Competitive Advantage

Sustainable competitive advantage may be realised by adoption of e-commerce strategies and business models. Rather than simply exchanging procurement transactions as with e-commerce practices, leading enterprises are executing e- commerce to share intellectual capital with their trading partners working as a value chain that provides a competitive advantage for the development and distribution of their products. The idea of giving the customer access to tracking information via the internet was a new one that had considerable appeal to the customer. For example , the use of new system also had considerable advantage to FedEx who no longer had to deal with a vast number of calls checking up on progress of consignment; because the customer could now access the system themselves. But e-commerce development and implementation could not be entirely private- customer had to become involved at some stage. The competitor was quick to catch on to the idea and UPS (United Parsal Services) was so...
Post a Comment
Read more

E-Commerce Implementation

The strategy diagram divides implementation into the technical and the business aspects and these are briefly considered below: Technical Implementation : The approach to technical implementation of an E-Commerce system depends on the business objectives, business requirements and technologies that have been selected. It is noted that many internet E-Commerce systems are cobbled(repaired) together rather than designed and that is often apparent. It is important that the design process considers: Is of use of system by intended end-users : Always an important factor in system design but crucial if the end user are to be members of the public with perhaps limited computer literacy and the option to switch to an alternative website if not satisfied. Functionality that users need : This has to be what the users want rather than what the organisation things they need. Uses of e-commerce are not a captive audience that can be interviewed and evaluated like the uses of a traditional IS develo...
Post a Comment
Read more

Electronic commerce introduction

Electronic Commerce ( e-commerce ) generally refers to all forms of transactions relating to commercial activities, involving both organizations and individuals that are based upon the processing and transmission of digitised data, including text, sound and visual images. E-Commerce has created a new environment in business transactions using internet. It deals with providing information to consumers regarding products of their interest. It provides a platform of advertisement of products, allows negotiations, order for raw materials, settlement of financial transactions etc. Electronic commerce is an integrations of communication services, data management and security mechanisms that allows organizations to exchange information about the sale of goods and services, where, Communication services supports the transfer of information from the buyer to the seller electronically. Data management is the exchange and storing of data in a uniform format to facilitate easy exchange of infor...
Post a Comment
Read more