Value chain refers to a range of activities conducted by organisations including manufacturing, designing, developing and distributing the products and services. In manufacturing organisations, value chain starts with the process of obtaining raw materials and ends with distributing final products and services to consumers. In addition, value chain analysis is a process to divide entire business activities into primary and support activities. It is a significant tool to identify the activities of the business in order to gain a competitive advantage.
Classification of Value Chain Analysis
Value chain analysis is comprised of primary and supportive activities that are discussed as follows:
- Primary activities –
- Inbound logistics – It refers to the activities used for receiving goods from suppliers and distributing goods to end consumer. These activities are receiving, storing and transmitting products and services.
- Operations – A process of conversion of raw material into completed goods, is known as a process of operations. It involves assembling, packaging and labeling in order to add value in products and services.
- Outbound logistics – A distribution of final products, is called outbound logistics. It involves the activities that distribute the products to wholesalers, distributors, customers and distribution centers.
- Marketing and sales – Many organisations use marketing mix strategy in order to target the products to the right customers. By using the marketing strategies, an organisation can aware its customers towards sales of the products. These strategies involve sales promotion, advertising, research and public relations.
- Service – Various types of services are used by businesses such as guarantees, warranties and after-sales services to facilitate customers. It maintains the value of products among customers that results in gaining a competitive advantage to the business. 2.Support activities – The activities that assist primary activities to reach objectives of the business, are called support activities. There are four areas that are covered under support activities such as HRM, infrastructure, procurement and technology development.
- Human resource management – In this activity, talented employees are recruited, hired and trained in organisations. For long term survival of the business, employees received incentives, rewards and paid leaves from their employers.
- Technology development – In the current technological environment, technology plays a significant role in business. Technology is often used by the manufacturing industry to reduce production cost of the products. Also, it is used by research and development businesses to introduce new products and services in the market place.
- Infrastructure – It has been observed that inadequate infrastructure negatively affects the reputation and image of the business. Thus, every business should develop effective management and legal structure for effective working in the market.
- Procurement – All the essential inputs such as machinery, material and other elements are supplied to organisations for accomplishing primary activities. An organisation procures high-quality resources according to its budget.