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Value Chains And Adding Value
 

Value Chains And Adding Value

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Self Guided Lecture # 2

Self Guided Lecture # 2

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    Value Chains And Adding Value Value Chains And Adding Value Presentation Transcript

    • Self Guided Lecture # 2 Strategic & Innovative Management Cristin Howell-Vischer, MIM MANAGEMENT II – MAN 2600
    • The Value Chain
    • What is a Value Chain?
      • A sequential process of value-creating activities
      • A categorization of the generic value adding activities of an organization
      • A concept described and popularized by Michael Porter in his 1985 best-seller, “Competitive Advantage: Creating and Sustaining Superior Performance”
      • It defines the organization’s activities as being either primary or support activities
    • The Value Chain General administration Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service
    • Primary Activities
      • Associated with receiving, storing and distributing inputs to the product
        • Location of distribution facilities
        • Material and inventory control systems
        • Systems to reduce time to send “returns” to suppliers
        • Warehouse layout and designs
      Inbound Logistics
    • Primary Activities
      • Associated with transforming inputs into the final product form
        • Efficient plant operations
        • Appropriate level of automation in manufacturing
        • Quality production control systems
        • Efficient plant layout and workflow design
      Inbound Logistics Operations
    • Primary Activities
      • Associated with collecting, storing, and distributing the product or service to buyers
        • Effective shipping processes
        • Efficient finished goods warehousing processes
        • Shipping of goods in large lot sizes
        • Quality material handling equipment
      Inbound Logistics Operations Outbound Logistics
    • Primary Activities
      • Associated with purchases of products and services by end users and the inducements used to get them to make purchases
        • Highly motivated and competent sales force
        • Innovative approaches to promotion and advertising
        • Selection of most appropriate distribution channels
        • Proper identification of customer segments and needs
        • Effective pricing strategies
      Inbound Logistics Operations Outbound Logistics Marketing and Sales
    • Primary Activities
      • Associated with providing service to enhance or maintain the value of the product
        • Effective use of procedures to solicit customer feedback and to act on information
        • Quick response to customer needs and emergencies
        • Ability to furnish replacement parts
        • Effective management of parts and equipment inventory
        • Quality of service personnel and ongoing training
        • Warranty and guarantee policies
      Inbound Logistics Operations Outbound Logistics Marketing and Sales Service
    • Support Activities
      • Typically supports the entire value chain and not individual activities
        • Effective planning systems
        • Ability of top management to anticipate and act on key environmental trends and events
        • Ability to obtain low-cost funds for capital expenditures and working capital
        • Excellent relationships with diverse stakeholder groups
        • Ability to coordinate and integrate activities across the value chain
        • Highly visible to inculcate (fix in people’s minds ) organizational culture, reputation, and values
      General Administration
    • Support Activities
      • Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel
        • Effective recruiting, development, and retention mechanisms for employees
        • Quality relations with trade unions
        • Quality work environment to maximize overall employee performance and minimize absenteeisn
        • Reward and incentive programs to motivate all employees
      General Administration Human Resource Management
    • Support Activities
      • Related to a wide range of activities and those embodied in processes and equipment and the product itself
        • Effective R&D activities for process and product initiatives
        • Positive collaborative relationships between R&D and other departments
        • State-of-the art facilities and equipment
        • Culture to enhance creativity and innovation
        • Excellent professional qualifications of personnel
        • Ability to meet critical deadlines
      General Administration Human Resource Management Technology Development
    • Support Activities
      • Function of purchasing inputs used in the firm’s value chain
        • Procurement of raw material inputs
        • Development of collaborative “win-win” relationships with suppliers
        • Effective procedures to purchase advertising and media services
        • Analysis and selection of alternate sources of inputs to minimize dependence on one supplier
        • Ability to make proper lease versus buy decisions
      General Administration Human Resource Management Technology Development Procurement
    • Resource-Based View of the Firm
      • Two perspectives
        • The internal analysis of phenomena within a company (SWOT)
        • An external analysis of the industry and its competitive environment (PEST)
      • Three key types of resources
        • Tangible resources
        • Intangible resources
        • Organizational capabilities
    • Types of Resources
      • Relatively easy to identify, and include physical and financial assets used to create value for customers
        • Financial resources
          • Firm’s cash accounts
          • Firm’s capacity to raise equity
          • Firm’s borrowing capacity
        • Physical resources
          • Modern plant and facilities
          • Favorable manufacturing locations
          • State-of-the-art machinery and equipment
      Tangible Resources
        • Technological resources
          • Trade secrets
          • Innovative production processes
          • Patents, copyrights, trademarks
        • Organizational resources
          • Effective strategic planning processes
          • Excellent evaluation and control systems
      Types of Resources Relatively easy to identify, and include physical and financial assets used to create value for customers Tangible Resources
    • Types of Resources
      • Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time
        • Human
          • Experience and capabilities of employees
          • Trust
          • Managerial skills
          • Firm-specific practices and procedures
      Tangible Resources Intangible Resources
    • Types of Resources
        • Innovation and creativity
          • Technical and scientific skills
          • Innovation capacities
        • Reputation
          • Effective strategic planning processes
          • Excellent evaluation and control systems
      Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time Tangible Resources Intangible Resources
    • Types of Resources
      • Competencies or skills that a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end
        • Outstanding customer service
        • Excellent product development capabilities
        • Innovativeness of products and services
        • Ability to hire, motivate, and retain human capital
      Tangible Resources Intangible Resources Organizational Capabilities
    • How Resources & Capabilities Lead to Advantages
    • Adding Value
    • Adding Value
      • Adding value means making the customer feel like they are getting real value for their money. This can happen by/through:
      • understanding and being close to the customer
      • committing to quality
      • maintaining a high level of all around service
      • reacting speedily to competitive opportunities and threats
      • constant innovation
    • Examples of Adding Value
        • warranties
        • extra car features (rust filter)
        • airlines (mix of offerings in seat choices)
        • taking away features seen as a nuisance (handy features)
        • services (grocery delivery)
        • convenience packaging (salad in a bag)
        • cleanliness, value, quality, service (formerly McDonalds)
        • ambience/lifestyle (Starbucks)
    • Opportunities for Adding Value
        • changes in industry regulation
        • marketing (segmentation/globalization)
        • operations (technology, cost reduction, service, quality)
        • people (exploiting expertise, encouraging innovation)
        • finance (globalization of financial markets, better use of assets)
        • information (exploiting the potential of information technology)
        • acquisition and restructuring strategies
        • co-operation strategies
    • Ten Ways to Add Value to Your Business
        • According to Dr. David J. Skyrme
        • Establish the Strategic Role of Information
        • Identify Users Real Needs
        • Segment Your Market
        • Create a Unique Product
        • Sales & Marketing
        • Evaluation & Feedback
        • Exploit Technology
        • Selective Outsourcing
        • Building Partnerships
        • Develop Hybrid Skills