Seminar: Value Chain Analysis

Made by: Aakash Patel(351) Adrian Dsouza(352) Ankit Garg(353) Ankit Prajapati(354)

Value chain The Introduction

Chain of activities that a firm operating in a specific industry does. Deliverable - valuable product or service for the market. First described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.

Value Chain Analysis

Value Chain Analysis is a useful tool for working out how you can create the greatest possible value for your customers. Analysis processes are concerned with producing
Better Faster Cheaper Products and services

Porters Value Chain Model

Two types of business activity: Primary activities: Those that enable it to fulfill its role in the industry value chain and hence satisfy its customers. They must be linked together effectively. Support activities: Those which are necessary to control and develop the business over time and there by add value indirectly.

A Value Chain

Fig: Porters Example of Value Chain

Primary Activities
Inbound logistics- Procuring, receiving and warehousing raw materials. Operations-Machining, assembly and manufacturing products. Outbound logistics- Getting the product to the customer. Marketing and sales- Advertising, marketing and selling. Service-Providing customer support and product repairs.

Primary Activities

Support Activities
Procurement: The purchasing of materials used to create value for the firm. Technology Development: Any technology used to support the firms value chain activities. Human Resource: The Activities surrounding the Recruiting, Hiring, Training and compensation of an organizations employees. Firm Infrastructure: The activities and functions that support a firms ability to create value such legal, accounting, management, strategy, etc.

The Uses of Value Chain Analysis

The main objective is to represent the main activities in the business and their relationships in terms of how they add value so as to satisfy the customer and obtain resources from suppliers. The information that flows throughout the industry and how critical that information is to the functioning of the industry and the success of the firms in it, by determining where and when that information is available, who has it and how it could be obtained and turned to advantage or used against the firm.

The Uses of Value Chain Analysis

The information that is or could be exchanged with customers and suppliers through out the chain to improve the performance of the business or lead to mutuallyimproved performance by sharing the benefits. How effectively the information flows through the primary processes and is used by them: -Within each activity to optimize performance -To link the activities together and avoid unnecessary costs and missed opportunities -To enable support activities to contribute to the valueadding processes, not hinder them

How to Use the Tool

Value Chain Analysis is a three-step process:
Activity Analysis
identify the activities you undertake to deliver your product or service

Value Analysis
think through what you would do to add the greatest value for your customer

Evaluation and Planning

evaluate whether it is worth making changes, and then plan for action

Step 1 Activity Analysis

Brainstorm the activities that you, your team or your company undertakes that in some way contribute towards your customer's experience Includes
marketing of your products or services sales and order-taking operational processes delivery support

Step 2 Value Analysis

Key thing is "Value Factors" the things that your customers' value in the way that each activity is conducted. Next to each activity you've identified, write down these Value Factors. Next to these Value, write down what needs to be done or changed to provide great value for each Value Factor.

Step 3 Evaluate Changes and Plan for Action

Quick,
Select the value which can be implemented quickly. The Vale that is taking more time will be discarded.

Easy
Select the value which is will easily be implemented and produce great value. Then screen the more difficult changes.

Cheap
Some values will deliver only marginal improvements, but at great cost. Discard them all.

Example
Mr.X is a software development manager for a software house. He and his team handle short software enhancements for many clients. As part of a team development day, he and his team use Value Chain Analysis to think about how they can deliver excellent service to their clients.

Step 1: Activity Analysis

During the Activity Analysis part of the session, they identify the following activities that create value for clients: Order taking Enhancement specification Scheduling Software development Programmer testing Secondary testing Delivery Support

Order Taking

Support

Enhancement Specification

Delivery

Scheduling

Secondary Testing

Software Development

Programmer Testing

Step 1 : Activity Analysis

Step 2: Vertical Analysis

Mr. X marks these out in a vertical value chain on his whiteboard

Step 3: Evaluate Changes and Plans for Action

Next, He and His team focus on the Order Taking process, and identify the factors that will give the greatest value to customers as part of this process. They identify the following Value Factors: Giving a quick answer to incoming phone calls.

Step 3: Evaluate Changes and Plans for Action

Having a good knowledge of the customer's business, situation and system, so that they do not waste the customer's time with unnecessary explanation. Asking all the right questions, and getting a full and accurate understanding of the customer's needs. Explaining the development process to the customer and managing his or her expectations as to the likely timetable for delivery.

 You can see these in the "Value Factors" column of figure 1. They then look at what they need to do to deliver the maximum value to the customer. These things are shown in the Figure 1's "Changes Needed" column. They then look at what they need to do to deliver the maximum value to the customer. These things are shown in the Figure 1's "Changes Needed" column. They then do the same for all other processes. Once all brainstorming is complete, Mr. X and his team may be able to identify quick wins, reject low yield or high cost options, and agree their priorities for implementation.

Conclusion
Value Chain Analysis is a useful way of thinking through the ways in which you deliver value to your customers, and reviewing all of the things you can do to maximize that value. It takes place as a three stage process: Activity Analysis, where you identify the activities that contribute to the delivery of your product or service.

Conclusion(Continue)
Value Analysis, where you identify the things that your customers value in the way you conduct each activity, and then work out the changes that are needed. Evaluation and Planning, where you decide what changes to make and plan how you will make them. By using Value Chain Analysis and by following it through to action, you can achieve excellence in the things that really matter to your customers.

Thank You