Value Chain Model By Ankur Mittal

VALUE CHAIN MODEL 

Value chain model views a firm as a series or “chain”, of basic activities that add value to its products and services and thus add a “margin” of value to the firm. In value chain concept there are two types of activities

Primary activities  Support activities 

The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities thereby resulting in a profit margin.

VALUE CHAIN MODEL

PRIMARY ACTIVITIES  Inbound

Logistics : the receiving and warehousing of raw material and their distribution to manufacturing as they are required.  Operations: the process of transforming inputs into finished products and services.  Outbound Logistics: the warehousing and distribution of finished goods.  Marketing & sales : the identification of customers needs and the generation of the sales.  Service: the support of customers after the products and services are sold to them.

VALUE CHAIN SYSTEM 

The firm’s value chain is linked to the value chain of upstream suppliers and downstream buyers. The result is larger stream of activities known as the value chain system

LINKAGES 

Activities in a value chain are collection of interdependent activities connected by linkages within the value chain. Linkages are the relationships between activities. To reduce cost and improve performance an organization must not focus on each value activity independently; the analysis must include both related activities and linkages between activities.

TYPES OF LINKAGES 

Internal Linkages Linkages may exist between activities in the same category or between categories (i.e., primary activities and support activities) within an organization (e.g., the quality of purchased goods affect the cost of production, the quality of a product affects the cost of maintenance).

TYPES OF LINKAGES  Vertical

Linkages Linkages exist not only within an organization's value chain but also cross organizational boundaries (e.g., suppliers and intermediaries). These linkages are comparable to an organization's internal linkages and affect the cost or performance of the organization's activities (and vice versa) (e.g. inventory management).

TYPES OF LINKAGES 

Customer Value Chain An organization's product and/or service is an input to its customer's value chain. To be successful an organization must create competitive advantage for its customer through its influence on the customer's value chain (i.e., must have a positive affect on its customer's costs and/or performance).