2007 Q4 Market Surveys Create Strategic Advantage
Value chain is the analysis of a business as a chain of activities that transform inputs into outputs that creates value for customers. Customer value comes from three basic sources: activities that differentiate the product, activities that lower its cost, and activities that meet the customer’s need quickly. Value chain analysis looks at how a business creates customer value by examining the activities and corresponding contributions within a business.
Typically, a business is comprised of both primary and secondary activities. Primary activities are those involved in the physical creation of the product or service, its marketing and delivery and after-sale support. Primary activities typically include…
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Service
The initial step in value chain analysis is to divide a company’s operations into specific activities or business processes and attach costs. Once the value chain has been documented, it becomes important to identify the activities that are critical to buyer satisfaction and market success. The activities that are examined are based upon the basic mission of the company e.g. superior service, low cost producer, quality, etc.
Value chain analysis is most effective when comparing the value chains of activities of key competitors. A meaningful comparison is critical when evaluat¬ing value activity so it can be determined if it is a strength or a weakness to the business.