VALUE CHAIN ANALYSIS

Prepared for :
Dr Norziaton Binti Ismail Khan

Prepared by :
Aiza Farhain Binti Fauzi 2015836598
Nur Afza Binti Shamsul Bahrin 2015856662
Nur Hazwani Hazirah Binti Maliki 2015826696
Siti Norsuhada Binti Che Ghani 2015237644

Group:
AC220 8E
 Value Chain?
• Value is how much customers willing to pay for
our products or services.
• Value chain represents the internal activities a
firm engages in when transforming inputs into
outputs.
• Value chain analysis is a process where a firm
identifies its primary and support activities that
add value to its final product analyze these
activities to reduce costs or increase
differentiation.
 Founder
• Introduced by Michael E. Porter in 1985.
• Discussed in his books ‘Competitive
Advantage’.
Porter’s Value Chain Model
 Primary activities
Related directly to the physical creation, sale,
maintenance and support of a product or
service. They consist of the following:
- Inbound logistic
- Operations
- Outbound logistics
- Marketing and sales
- Service
 Support activities
Support the primary function (indirectly add
value). They consist of:
- Procurement (purchasing)
- Human resources management
- Technological development
- Firm Infrastructure
 Approaches
• Competitive Advantage Types:

1. Cost advantage
- Organization try to compete on cost and want
to understand the sources of their cost
advantage or disadvantage and what factor
drive those cost.
Competitive Advantage Types (cont’d):
5 analysis steps to gain cost advantage:

Step 1 • Identify the firm’s primary and support activities

• Establish the relative importance of each activity in the total cost of

Step 2 the product

•Identify cost drivers for each activity

Step 3

• Identify links between activities

Step 4

• Identify opportunities for reducing cost

Step 5
Competitive Advantage Types (cont’d):

2. Differentiation advantage
- Strive to create superior product or services
use differentiation advantage approaches.
Competitive Advantage Types (cont’d):
3 analysis steps to gain differentiation
advantage:

• Identify the customers’ value – creating activities

Step 1

• Evaluate the differentiation strategies for

Step 2 improving customer value

• Identify the best sustainable differentiation

Step 3
 Advantages and Disadvantages

- Increase competitive - Too much work.

advantage. - Employee
- Very flexible strategy limitation.
tool.
- Increase product
value.
 Example

McDonald’s
 Primary Activities
• Inbound logistics
- McD’s purchases raw vegetables and other raw
materials from its fixed, pre-defined suppliers only,
therefore by increasing capital and labour, their
production will increase proportionately.

• Operations
- Ensure specific guidelines are followed in food
preparation.
- Computerized order tracking technology that
ensures consistency in service and food production.
 Primary Activities (cont’d)
• Outbound logistics
- Providing the highest quality food and
superior service, and a great value, in a clean
and welcoming environment.
- Focus on energy conservation, sustainable
packaging and waste management.
 Primary Activities (cont’d)
• Marketing & sales
- Found in 119 countries around the world and
operates over 33,000 restaurant worldwide.
- Maintain an extensive advertising campaign.

• Service
- Free Wi-Fi for customers
- Delivery service for customers
- Play place and parties
 Support Activities
• Procurement
- E-procurement system provides the backbone not only
to all the logistics but the whole McD’s supply chain
management.
- Allow business owner’s to buy supplies and materials
at the discounted price.

• Human resources management

- Offer flexible working hours .
- Conduct training session.
- Providing sufficient training to employees.
 Support Activities (cont’d)
• Technological development
- Drive-thru
- Online order

• Firm Infrastructure
- Conduct hotline customer service to file
complain or offer suggestion.