VALUE CHAIN MANAGEMENT

Value Chain Management

Value Chain Management

Introduction

Value chain is defined as a process which describes the activities and functions performed by the organizations that are designed in order to produce a product and provide a service. This model of the value chain has helped Michael Porter in forming his book, named “Competitive Advantage” in 1985. the model of the value chain has two functions which act as an effective method for the consultant in understanding that every firm has a different set of activities and these activities are divvied into two categories: 1) the Primary Activities which are directly related to the products and services of the organizations. Michael Porter has divided these activities into five categories. Firstly, the inbound logistics- which means every activity is concerned with the responsibility of raw material, starting from the handling till the operations are categorized, like storing control and receiving control. Secondly, operations that are connected with the activities which transforms the raw material into finished products and services of the company. Thirdly, the outbound logistics - referred to stores and distribution divisions which help in distributing the products to consumers. Additionally, sales and marketing activity include all those activities that are in charge for introducing the product or service of a firm to its consumers or to spread awareness about the firm's product or service. In addition, service means the activity which supports in enhancing the value of the product or the service.Support Activity is the second category of these activities. It transforms all the activities into Primary Activity for increasing effectiveness and efficiency. Michael Porter has divided these activities into five categories that are stated below:

Firm infrastructure

Human resource management

Procurement

Technology development

Second activity of the value chain model specifies the strategic position if the firm in three different ways. It starts with highlighting the most essential sections of activities that deal in with the needs of the consumers which makes the consultant to pay attention to these activities.

Third step consists of analysis of all categories and activities performed by the organization starting from cost to the value by ordinal steps. Firstly, it defines value chain as a set of important categories which describe the firm's activities that help in achieving the advantage of completion (Porter, 1982, 55). Secondly, it defines the categories that are stated as significant for a firm's product and service along with the comparison between the important set of activities and costs. Thirdly, it provides an external comparison between the categories of a firm and those of the similar organization in the same industry. Moreover, it defines the ability of reduction in cost, of a firm's category, to ensure the balance with the strategic significance(Swank, 2003, pp. 45-57).

Managing the Value Chain

Managing the value chain is very important for business management and organizations to achieve competitive advantage and gain customer's value. Value chain management is activities that contribute to the value of the product more than its cost. The product passes through many phases with value added in every phase to serve ...