Shivalik Institue of Management

Eduction & Reserach

Presentation
On
The ValueChain

Presented By: Acads Committee

 Value Chain

An analytical tool that describes all activities that make up the

economic performance and capabilities of the firm; used to
analyze and examine activities that create value for a given firm.
 Firm’s Activities
• Primary activities
Economic activities that relate directly to the
actual creation, manufacture, distribution and
sale of a particular product or service to the firms
customer.

• Support activities
Economic activities that assist the firms primary
activities
 Activities in the value chain
• Upstream activities
Occur far away from the consumer close to the firm’s
suppliers. In other words upstream activities are
performed in the early stages of the value adding
process.

• Downstream activities
Occur closer to the firm’s buyers. Downstream activities
add value to those inputs that were processed through
earlier upstream value adding activities.
• The sequence of activities through which raw
materials are transformed into benefits
enjoyed by customers is called primary
activities.
Five major activities make up this sequence

• Inbound logistics
• Operations
• Outbound logistics
• Marketing/ sales
• service
 Inbound logistics
• It deals with the handling of materials and
inventory received from the firm’s suppliers.
The typical operational procedures and tasks
surrounding inbound logistics include
warehousing, storage, and control of raw
materials or managing component flows from
different suppliers.
 Operations
• Activities and procedures that transform raw
materials, components, and other inputs into
finished end products. In other words,
operations concerns itself with the generation,
manufacture, and/or production of products
and services.
 Outbound logistics
• It refers to the transfer of finished end product
to the distribution channels. The focus in
outbound logistics is on managing the flow
and distribution of products to the firm’s
immediate buyers, such as wholesalers and
retailers.
 Marketing and Sales
• Marketing is vital in helping the firm
determine the competitive scope of its value
adding activities. For eg, some firms may
decide to concentrate their efforts on a
specific market segment or niche, whereas
other firms may want to pursue a more broad-
line product strategy.
 Service
• Customer service is a central value-adding
activity that a firm can seek to improve over
time. During the 1990’s an increasing number
of companies began redefining the way they
manage their customer service activities.
Value is more defined in the eyes of the
customer rather than by what the firm thinks
it has created.
• The remaining activities of the value chain are
undertaken to support primary activities. They
are therefore referred to as the support
activities. The sequence followed in these
activities are
 The activities in this sequence are
• Procurement
• Technology development
• Human recourse management
• Infrastructure
 Procurement
• Procurement refers to purchasing the
necessary inputs, resources or components for
the firms primary value adding activity. The
purchasing function involves specific
procedures such as billing systems, methods
for dealing with suppliers and vendors, and
information systems about different
components and parts.
 Technology Development
• Technology is found in every value adding
activity within the firm. Given the rapid
technological changes that are present in
almost every industry (for eg. new forms of
communications, software, internet, security
systems) , this support activity has assumed
enormous importance in every firm.
 Human Resource Management
• These activities focus on recruiting, hiring,
compensating and training people to perform
their jobs within the firm. As with technology
development, human resource management
receives considerable action from top
management because of its strategic role in
helping the firm learn and build new types of
competitive skills.
 Firm infrastructure
• These activities assist all of a firms value
adding functions, so it is difficult to put an
accurate dollar figure on their worth to the
firm. Because infrastructure costs are hard to
isolate, they are often called overhead
expenses.
Thank You
• The value chain in this industry begin with
transport of components from suppliers to
auto assembly facilities (inbound logistics).
Components are then assembled into finished
autos (operations), and the finished cars are
shipped to dealers (outbound logistics).
Finally, dealers sell cars to customers
(marketing/sales) and maintain the products
owned by customers (service).
• Procurement
• Work with suppliers and transport firms to secure parts
and warehouse space; procure machinery, equipment,
parts and components to operate factories; media
advertising space to conduct marketing/sales; and
specialized tools, lubricants, parts and diagnostic machines
to provide auto service.
• Note: procurement does not deal with the physical
movement of goods or “logistics”. Rather, it focuses on
identification of suppliers, evaluation of supplier offerings,
and negotiation of purchase terms.
 td
• Inbound and outbound logistics activities in
the auto industry can be improved by
redesigning the flow of component and
finished product inventories in warehouses
and transportation facilities to improve
efficiency and timeliness. These initiatives
include suppliers, distributors, logistics firms,
railroads, and trucking companies.
 HRM
• Personnel performing primary activities must
be recruited, trained, developed, motivated
and supervised. HRM, through its activities,
helps improve product quality, innovation and
productivity.
 Infra
• Primary activities require capital budgeting,
financing, accounting, legal affairs, govt.
affairs, and admin. Assistance . These infra.
Activities help automakers finance expansion,
communicate with shareholders, and work
with the govt. in implementing new types of
env. And fuel efficiency regulations.