Introduction: The Value Chain
The concept of the value chain comes from business management and was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance
The value chain is a set of activities or processes that an organization performs in order to deliver their products or services to the market. There are five primary value chain areas and four support areas. For our purposes, it is necessary to identify the strengths and weaknesses of key processes throughout the five value chain areas. See figure 1.
Figure 1: The Value Chain
Primary Activities
Inbound Logistics: Refers to the transport, storage and delivery of goods coming into your business. Examples would include raw material planning, warehousing, and receiving, and all interfaces with suppliers.
Operations: Refers to the processes of transforming inputs into finished products and services. Examples would include production, development, and product improvement processes.
Outbound Logistics: Refers to the processes related to the storage and movement of the final product and the related information flows from the end of production to the end user. Examples would include order taking, packaging, inventory management, and delivery of the final product to the customer.
Marketing and Sales: Refers to the identification of customer needs and the generation of sales. Examples would include advertising, product promotion, branding, and selling.
Service: Refers to the services offered by the organization after the products and/or services have been sold. Examples would include sales guarantees, warranties, repair services, installation, and support.
Support Activities
Infrastructure: Refers general management activities. Examples would include planning, finance, accounting, legal, quality management, project management, and organizational structure.
HR Management: Refers to activities associated with employee management. Examples would include recruiting employees and contractors, hiring, training, and compensation.
Technology Development: Refers to technology development to support the value chain activities. Examples would include research and development, process automation, design, redesign, and software.
Procurement: Refers to activities associated with company purchases from external sources. Examples would include purchasing the raw materials, spare parts, buildings, and machinery
Questionnaire
Your answers to the questionnaire will be extrapolated into part of your strategic framework. It is obvious then, that your strategy will be only as good as the answers you provide.
After completing the internal questionnaire, review your answers, looking for assumptions, opinions, qualified measurements, or guesses you may have made. Once you are happy with your answers, move on to Strategy Formulation Step 3 of 4: Primary Strategy Selection.
Value Chain Activities
Inbound Logistics: Refers to the transport, storage and delivery of goods coming into your business. Examples would include inventory planning, warehousing, receiving, and all interfaces with suppliers.
a) What inbound processes can you control or need to control to achieve your goal?
Answer: _______________________________________
b) With regard to inbound processes, what improvements or changes are needed to support the achievement of your goal?
1. Infrastructure?
Answer: ____________________________________
2.Technology?
Answer: ____________________________________
3. Human Resources?
Answer: ____________________________________
4. Procurement?
Answer: ____________________________________
Operations: Refers to the processes of transforming inputs into finished products and services. Examples would include the production process, development activities, packaging, etc.
a) What operational processes can you control or need to control to achieve your goal?
Answer: _______________________________________
b) With regard to operational processes, what improvements or changes are needed to support the achievement of your goal?
1. Infrastructure?
Answer: ____________________________________
2.Technology?
Answer: ____________________________________
3. Human Resources?
Answer: ____________________________________
4. Procurement?
Answer: ____________________________________
Outbound Logistics: Refers to the processes related to the storage and movement of the final product and the related information flows from the end of production to the end user.
a) What outbound processes can you control or need to control to achieve your goal?
Answer: _______________________________________
b) With regard to outbound processes, what improvements or changes are needed to support the achievement of your goal?
1. Infrastructure?
Answer: ____________________________________
2.Technology?
Answer: ____________________________________
3. Human Resources?
Answer: ____________________________________
4. Procurement?
Answer: ____________________________________
Marketing and Sales: Refers to the identification of customer needs and the generation of sales. Examples would include advertising, product promotion, branding, selling, etc.
a) What marketing and sales processes can you control or need to control to achieve your goal?
Answer: _______________________________________
b) With regard to sales and marketing processes, what improvements or changes are needed to support the achievement of your goal?
1. Infrastructure?
Answer: ____________________________________
2.Technology?
Answer: ____________________________________
3. Human Resources?
Answer: ____________________________________
4. Procurement?
Answer: ____________________________________
Service: Refers to the services offered by the organization after the products and/or services have been sold. Examples would include sales guarantees, warranties, repair services, installation etc.
a) What service processes can you control or need to control to achieve your goal?
__________________________________________
b) With regard to service processes, what improvements or changes are needed to support the achievement of your goal?
1. Infrastructure?
Answer: ____________________________________
2.Technology?
Answer: ____________________________________
3. Human Resources?
Answer: ____________________________________
4. Procurement?
Answer: ____________________________________
