Porter’s Value Chain

Michael Porter’s Value chain concept is one of the most valued concept in today’s
market because the Value chain tells us how we can differentiate our products by
analyzing the chain of events which occur within our company.
The Porter’s value chain concept says that there is a chain of events which occur in a
company right from the procurement of raw materials to the delivery of goods as well as
the post sales service. This chain is made up of 9 steps.
The first 5 are the primary activities which are the basics in any company and are the
activities which provide strength and sustainability to the company. The remaining 4 are
the support activities or also known as the secondary activities and these are used by
the company for differentiation as well as maintenance of the organization.
1) Inbound logistics
Bring raw material from source to the company. The value chain can be enhanced in
this step by improving the quality of raw material as well as optimizing the cost of
inbound logistics.
2) Operations
Converting the raw material to finished goods is the job of Operations.
3) Outbound logistics
Sending finished goods from manufacturing point to distributors and retailers.
4) Marketing and sales
The marketing and sales apply push as well as pull strategy to increase the sales of the
product. The company exists to make profits and if profits can be increased by
marketing and sales, than the company has to use these tools.
5) Service
The post sales service is the most important because it directly affects the word of
mouth publicity of the product. If the service is not upto mark, no one will buy the
product and the brand will lose market share and may be taken out of the market
eventually. Thus service is very important in the Porter’s value chain.
6) Procurement
The management of vendors and the procurement of the raw material on a timely basis
is where procurement comes in.
7) Technology development
No product can survive if the company does not keep it updated as per the
latest technology.
8) Human resource management
The right people in the right place can make all the difference for the company and
hence the HR department is a support activity most important for the firm.
9) Firm infrastructure
Without a proper infrastructure, and lack of government handling or legal support, a firm
might face a big hurdle. Similarly, administration department will help in maintenance of
the facilities in a firm.

BENEFITS OF VALUE CHAIN MANAGEMENT

 Improved bids and proposals Effective VCM improves your ability to capture,
track and manage customer and marketing requirements to better estimate design,
planning, procurement, production and service activities for more accurate cost
estimates — all with complete traceability.
 Better product planning, research, and development Good VCM includes
developing a cross-functional team approach to planning, developing, delivering and
servicing products focused on program performance, cost reduction and product quality.
This enables you to more effectively plan and implement simultaneous projects while
managing resource allocation, costs, scheduling and deliverables more efficiently.
 Standardized processes VCM calls for repeatable and measurable business
processes to better manage the product master data to ensure that customer
expectations and commitments are met. Active VCM enables release and change
processes to be better managed from concept to implementation. Standard, reliable and
repeatable processes contribute significantly to reducing overall operational
inefficiencies and waste.
 Improved vendor management Synchronizing design and sourcing teams with
vendors ensures that outsourced components and subsystems are managed to meet
performance, quality, schedule and cost requirements while avoiding design flaws,
excess inventory and waste.
 Post-sales service and support Through VCM, you’re able to better manage
and track in-service product configuration changes coordinated among field service,
customer support and engineering resources.
 Reduced costs Optimizing all the value chain components listed above can
result in substantial end-to-end cost savings from streamlined processes, reduced
inefficiencies and waste, better inventory control and improved product quality.
 Improved profitability The ultimate result of a comprehensive and robust VCM
program is enhanced revenues and better profit margins, contributing to greater overall
success.

STRATEGIC FRAMEWORK
A strategic framework is a structured method used to define how a project or initiative
supports the key objectives of stakeholders.
Elements of the framework
The framework is made up of three elements. These elements represent 1) the object of
strategy, 2) the activities involved in strategy formation and execution, and 3) the
people's capabilities
1. Business design construct : The business design construct is a template reflecting
the structure and elements of the business organization. The construct defines the form
the answer to inquiry takes. Inquiry is the process to understand and design a business
organization. Therefore, the design construct template is used to represent the intended
outcome of the strategy. The use of the construct provides strategic insights and
stimulates creative innovation of the business design.
2. Strategic management principles and activities -- These are the activities that
form and execute strategy. They produce the understanding necessary to develop
innovative strategy, the business designs to be deployed, plan the deployment, and
carry out the deployment.
3. Organization member capabilities -- These are the capabilities the people of the
organization needed to carry out the activities to produce an advantage. These
capabilities are categorized into three levels - leadership and management begin the
foundation, innovation being the next level, and business design being the highest level.