Angela Suarez Lozano_S40031030

AUSTRALIAN PACIFIC COLLEGE

BSBMGT616A DEVELOP & IMPLEMENT

STRATEGIC PLANS
STRATEGIC PLANNING

Angela Suarez Lozano

6/5/2013

BSB60407 Advanced Diploma of Management

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Angela Suarez Lozano_S40031030

TABLE OF CONTENTS
VALUE CHAIN ANALYSIS REPORT
A. Introcuction - What is Value Chain Analysis .................................................................. 3
B. Primary Activities ........................................................................................................... 4
C. Secondary/Support Activities ........................................................................................ 4
D. Cost Advantages............................................................................................................. 5
E. Differentiation................................................................................................................ 5
F. Technology ..................................................................................................................... 6
G. Linkages.......................................................................................................................... 6
H. Outsourcing.................................................................................................................... 6
CONCLUSIONS ................................................................................................................ 6
REFERENCES ................................................................................................................... 7

Angela Suarez Lozano_S40031030

A. INTROCUCTION - WHAT IS VALUE CHAIN ANALYSIS

A value chain consists of a series of activities developed by business in order to deliver
services and/or products. Value chain analysis is a tool used to add the greatest possible
value within those products.
Michael Porter published this business management concept in 1985 in his best-seller book
Competitive Advantage: Creating and Sustaining Superior Performance. It includes the
following value generic chain model which could be applied to a wide range of business and
industries:

(Retrieved fro Google images).

Angela Suarez Lozano_S40031030

B. PRIMARY ACTIVITIES
Primary activities aim to achieve profit margin to the market and can be classified into the
following:
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Inbound logistics: production and management activities related to raw materials

including receiving goods from suppliers, decision about the transportation
scheduling, storing the goods, managing the inventory, etc.

Operations: activities that transform the inputs into finished product and services
including production process, development activities, testing, packaging,
maintenance, and so on.

Outbound Logistics: management of finished products requiring transfer the final

products to the customers via warehousing, order fulfilment, transportation, and
distribution management.

Marketing and Sales: These activities include the advertising, channel selection,
product promotion, selling, product pricing, retail management, etc. Marketing mix
can be used to identify customer needs by determining price, product, promotion
and place of our target market.

Services: customer support organizations provide after the products and/or services
have been sold. These are guarantees, repair services, installation, updating,
trainings, etc.

C. SECONDARY/SUPPORT ACTIVITIES
These are the activities that the organization performs to assist the primary activities.
-

Infrastructure: This includes the planning management to meet the strategic plan
and the objectives.

Human Resource Management: define the work positions by hiring, recognition,

reward, appraisal systems, carrier planning, and employee development. This
department aims to motivate employees and create a happy working environment.

Technology Development: Technology can be used in production to reduce cost, to

develop new products, build up cost effective process, etc. It supports value
activities such as research and development or process design.

Procurement: This is the purchasing activity of the inputs to transform these into
finished products or services.
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Angela Suarez Lozano_S40031030

D. COST ADVANTAGES
Cost advantages through value chain can be achieved via reducing cost in activities
individually or globally changing, improving and/or restructuring the value chain.
Thus, to assess this advantages a cost analysis needs to be done by assigning cots to the
different activities in the chain.
According to Porter there are ten general costs driving value chain activities:
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Economies of scale
Learning
Capacity utilization
Linkages among activities
Interrelationships among business units
Degree of vertical integration
Timing of market entry
Firm's policy of cost or differentiation
Geographic location
Institutional factors (regulation, union activity, taxes, etc.)

Porter suggests that success is embodied in the way organizations manage these drivers.
The alternative way is restructuring the value chain which implies changes such a new
production processes, new distribution channels, or a different sales approach.
E. DIFFERENTIATION
In most of the cases differentiation comes from uniqueness and serves to distinguish and
stand out among others. This differentiation can originate in any area within in the value
chain by either changing/improving individual activities or by restructuration of the chain.
Porters drivers of differentiation are:
-

Policies and decisions

Linkages among activities
Timing
Location
Interrelationships
Learning
Integration
Scale (e.g. better service as a result of large scale)
Institutional factors

Usually, differentiation incurs costs, therefore, risk must be analysed to ensure pay back of
the investment.
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Angela Suarez Lozano_S40031030

F. TECHNOLOGY
Technology can have a great impact on value chains. Directly or indirectly, it may affect or
influence all areas and/or activities within the chain when it comes to creating value.
Therefore, it must to be taken into consideration.
For instance, transportation and communication can considerable are crucial to inbound
and outbound logistics, as well as for operations are maintenance and processes. Marketing,
for example, completely relays on technology as means of communication.
Thus, technology has a massive impact that can lead to competitive advantage.

G. LINKAGES BETWEEN VALUE CHAIN ACTIVITIES

The different activities contained in a value chain are interrelated to an extent where they
mutually affect not only each others performance but also the cost.
For example, decreasing production quantities might incur in lower capital cost, since less
raw material is required. Nevertheless, increases indirect costs such as office or HRs costs
(e.g. Rent associated costs, salaries, etc).
However, in some other cases cost reduction may come from processes design
improvement for example where no other areas are negatively affected. This brings
competitive advantage to the organization.

H. OUTSOURCING VALUE CHAIN ACTIVITIES

Understanding the organizations strengths and weaknesses in each activity is essential to
determine which value chain activities it should focus and specialised on and which ones to
outsource. Some considerations to be taken into account in this process are: cost, firm core
competences and related activities, risks and outsourcing outcomes.

CONCLUSION
Value chain analysis is an incredible useful tool that help firms to add the greatest possible
value within their products and services and to rich their maximum potential as
organizations.

Angela Suarez Lozano_S40031030

REFERENCES
1. http://www.netmba.com/strategy/value-chain/
2. http://www.marketingteacher.com/Lessons/lesson_value_chain.htm
3. http://www.tutor2u.net/business/strategy/value_chain_analisys.htm