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  • The internal environment of a business is that part over which you as a manager have control. You can influence the things that go on in the business. This presentation will give a number of tools that will help you think about the business.
  • The SWOT that we’ve been dealing with in other lectures has been a useful tool to helping identify key characteristics of our businesses, but it doesn’t really help guide us to choosing strategies. For that there is the TOWS matrix which will integrate some of the things we’ve used to create the SWOT.
    The next slide shows what the SWOT is made of.
  • Strengths and weaknesses are the internal side of a SWOT analysis. SWOT is a tool for auditing an organization and its environment. It is the first stage of planning and helps managers focus on key issues. Once key issues have been identified, they feed into objectives. It can be used in conjunction with other tools for audit and analysis, such Porter's Five-Forces analysis.
    SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. For example, a strength could be your specialist expertise. A weakness could be the lack of good genetics. Opportunities and threats are external factors. For example, an opportunity could be a developing market such as the Internet. A threat could be a new competitor in your home market. During the SWOT exercise, the four titles are often written on a page. List factors under each title. It's that simple. This presentation is only on the internal factors.
  • Here is the SWOT tool we introduced in the Business Environment section. SWOT is a conceptual framework for a systematic analysis that helps organize the external threats and opportunities with the internal weaknesses and strengths of the organization. To use it you simply list the strengths/weaknesses you have in your business and the opportunities and threats you face. You can use the IFAS and EFAS tables to help list those items.
    SWOT analysis is the simplest way to conduct environmental scanning. A SWOT analysis should result in the identification of an organization’s core competencies, and of opportunities that the company is unable to take advantage of due to a lack of, or insufficient, current resources.
    Let’s take this a step further and develop some useful strategies out of the assessments you’ve done, using the TOWS matrix.
  • The TOWS tool combines the ingredients of SWOT (our assessment of the internal and external environments, which used the EFAS and IFAS tables) in a way that can suggest some strategies. It matches external opportunities and threats facing a particular company with that company’s internal strengths and weaknesses to result in four sets of possible strategic alternatives.
    Have we got some examples of some strategies?
    SO Strategies
    ST Strategies
    WO Strategies
    WT Strategies
    Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, “The TOWS Matrix—A Tool for Situational Analysis.” and Wheelen and Hunger
  • Now we have the TOWS matrix which uses the same basic breakdown by the external and internal analysis. But we’re going beyond basic assessment of the situation and onto strategy formulation. The next slide shows how it is organized.
    The model starts with threat (The T in TOWS) because in many situations a company undertakes strategic planning as a result of a perceived crisis, problem, or threat.
  • The Value Chain is one way to help identify core competencies in your business.
    The value chain is a systematic approach to examining the development of competitive advantage. It was created by Michael E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization. The 'margin' depicted in the diagram (next slide) is the same as added value. The organization is split into 'primary activities' and 'support activities.‘
  • The Value Chain, or value plate illustrates how to break down the functions of a company into its activities. The bottom half of the figure contains the primary activities that the firm conducts. These include inbound logistics, or the way in which the company receives, stores, etc. its inputs. Operations is the basic activity of producing your product. Outbound logistics are the activities associated with storing and distributing your final product. Marketing and sales are all of the activities associated with attracting and keeping customers for your products. Service is the activities associated with providing support to your customers for your products including users manuals, help lines, warranties, etc. Inbound logistics and Operations relate to your suppliers. Outbound logistics, marketing and sales and service relate to buyers.
    As you move from left to right the primary activities move through time and adding further value to the end product. Linking these five primary activities together forms a chain.
    The top half of the graph represents a set of activities that are conducted to support the primary activities of the firm. These would include procurement which are all of the activities associated with negotiating, financing, and paying for all inputs necessary for the business from raw inputs used in the final product to pencil used in the accounting office. Technology development is the activities associated with research and development and included R&D in all phases of the primary activities not just R&D associated with new product development (things like process improvement research, distribution improvement research, market research activities to support marketing, etc. Human resources are the support activities associated with hiring, firing, compensating, retaining, and training personnel for the company. Finally firm infrastructure is the top management activities of the firm which include, negotiating with the government, negotiating with competitors, developing the firms long-term strategy, development and maintenance of information systems for assessing firm performance, etc.
    The next slides further explain the activities.
    What do you do with this figure? That is, what support and primary activities do you do better than your competitors and which ones do you not do so well relative to your competitors. This is a great tool for helping you assess your strengths and weaknesses in a more structured way. It helps think about ALL of the activities that you conduct in your business and critical assess whether you are doing each activity as well as you can. This figure helps you focus on specific activities that you do well relative to your competitors so that you can determine what your core competencies are relative to your competitors.
  • Inbound Logistics
    Here goods are received from a company's suppliers. They are stored until they are needed in the production. Goods are moved around the organization.
    Operations
    This is where goods are grown or produced. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.
    Outbound Logistics
    The products are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer – whatever the next step in the industry chain.
  • Marketing and Sales
    In true customer orientated fashion, at this stage the organization prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.
    Service
    This includes all areas of service such as after-sales service, complaints handling, and so on.
    Marketing strategy has four components, known as the 4 P’s (Product, Price, Place and Promotion). We in agriculture have tended to think of marketing as only a factor of Price, (in terms of future/options, the market price etc). But it is much more broad. All sorts of things can be done to sell your product. This is asking your elevator manager if you can do something different. Can you deliver to the elevator at an off-peak time (an example of place)? Finding ways to solve someone else’s problem is how you create and capture value.
  • Procurement
    This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organizations).
    Technology Development
    Technology is an important source of competitive advantage. Farms need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, and many other technological developments.
    Human Resource Management (HR)
    Employees are an expensive and vital resource. An organization would manage recruitment and selection, training and development, and rewards and compensation. The mission and objectives of the organization would be driving force behind the HR strategy.
  • Firm Infrastructure
    This activity includes and is driven by corporate or strategic planning. It includes the mechanisms for planning and control such as accounting.
  • The customer has to be willing to write a check for what you do.
  • Let’s go through an example of a value chain. This one will be of a grain producing division of a farm. The next slides will identify specific actions in each activity.
  • Here is the bottom half of the value chain. These are the primary activities a grain farm performs as it creates and delivers its product.
  • These activities are the supporting activities for the value chain of a grain farm that a business has to perform in able to effectively perform its primary activities.
  • Business environment latest_1

    1. 1. BUSINESS “BUSINESS MAY BE UNDERSTOOD AS THE ORGANISED EFFORTS OF ENTERPRISES TO PROVIDE CONSUMERS WITH GOODS & SERVICES FOR A PROFIT”
    2. 2. ENVIRONMENT “ENVIRONMENT REFERS TO ALL EXTERNAL & INTERNAL FORCES WHICH HAVE A BEARING ON THE FUNCTIONING OF BUSINESS”
    3. 3.  Business enterprises cannot function in isolation  Open systems interact with their environment  Society and business enterprises are mutually dependent  Relationship between society and business enterprises takes place in a changing environment.
    4. 4. BUSINESS OBJECTIVES
    5. 5. VISION INFOSYS: “TO BE A GLOBALLY RESPECTED CORPORATION THAT PROVIDES BEST OF BREED BUSINESS SOLUTIONS, LEVERAGING TECHNOLOGY, VENDORS & SOCIETY AT LARGE”
    6. 6. MISSION INFOSYS: “TO ACHIEVE OUR OBJECTIVES IN AN ENVIRONMENT OF FAIRNESS, HONESTY & COURTESY TOWARDS OUR CLIENTS, EMPLOYEES, VENDORS & SOCIETY AT LARGE”
    7. 7. BUSINESS OBJECTIVES  PROFIT MAXIMISATION  MARKET SHARE MAXIMISATION  CORPORATE GROWTH  SURVIVAL
    8. 8.  Business environment consist of all those factors that have a bearing on the business.  Like the survival & success of individual depends on his innate capacity like physiological factors to cope with environment similarly BUSINESS firm depends on its innate strength like Resources (Physical ,Human, Financial)
    9. 9. BUSINESS STRATEGY Strategy implementation involves:  Allocation of sufficient resources (financial, personnel, time, technology support)  Establishing a chain of command or some alternative structure (such as cross functional teams)  Assigning responsibility of specific tasks or processes to specific individuals or groups
    10. 10. CONT……..  Involves managing the process which includes monitoring results, comparing to benchmarks and best practices, evaluating efficiency of the process and making adjustments to the process as necessary.  When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.
    11. 11. COMPONENTS OF THE BUSINESS ENVIRONMENT  The survival of business depends on 2 set of factors :a) External Factors  Micro environment  Macro environment b) Internal Factors External factors Analysis  Business Opportunity & Threats Internal Factors Analysis  Strengths & Weakness
    12. 12. THE MICRO-ENVIRONMENT  Comprises all those organisations and individuals who directly or indirectly affect the activities of a company. It includes:  Customers  Intermediaries  Suppliers  Other stakeholders
    13. 13. THE MACRO-ENVIRONMENT  Comprises general forces and trends rather than specific organisations:  Macro-economic environment  Political environment  Social and cultural environment  Demographic environment  Technological environment
    14. 14. ENVIRONMENTAL SCANNING  Identification and forecasting phenomena in the environment  Ongoing environmental scanning is essential for strategy formulation  Enterprises continuously engage in identifying and forecasting opportunities and threats
    15. 15. Enterprises need to proactively or reactively respond to changing conditions in the environment Various sources of information are available to assist with scanning
    16. 16. External Environment
    17. 17. MACRO External Business Environment
    18. 18. Technology Environment  Need to spend on R&D  Fast changing Technology  High expectation of consumers.  Computers in the Office  Elimination of Jobs  System complexity
    19. 19. SOCIAL-CULTURAL ENVIRONMENT  How Consumers ,HH,& communities behave & their beliefs e.g change in attitude towards health  Public Service Provision - Roads, Water, etc..  Welfare  Social Security  Labor Movement  Diverse Workforce  Public Sector Unions
    20. 20.  People’s attitude to business  Caste system
    21. 21. ECONOMIC ENVIRONMENT  Overall Economic Conditions  Infrastructure  GDP, Unemployment Rate, Stock Market  Per capita income  Population  Agriculture
    22. 22. Global / International Environment  Globalization of Industry  Improving quality  Deciding which market to enter and how to enter  International Trade  End of Communism  Wars, International Strife
    23. 23. Natural Environment  Agriculture depends on nature  Transport & communication depends on geographical factors  Trade between two regions depending on their geographical factors
    24. 24. Micro External Business Environment
    25. 25. Suppliers  Smooth functioning of business  Multiple source of supply helps to reduce risk Customers  Whole n soul of business  Segmentation  Pull strategy from competitors
    26. 26. Intermediaries  Link b/w Company n Customers  Assist company in stocking & moving goods from their origin place to destination  Assist company in promotions activities Competitors Financers
    27. 27. Internal Factors
    28. 28. INTERNAL ENVIRONMENT
    29. 29. Mission & Objective  Business domain of company, priorities, direction of development ,business philosophy ,business policy are guided by mission & objective of the company .  E.g. Ranbaxy ‘s mission statement “To become a research based international pharma company “  E.g. Arvind mills mission statement ” To achieve dominance in select businesses built around our core competencies through continuous product and technical innovation ,customer orientation and focus on cost effectiveness “
    30. 30. MANAGEMENT STRUCTURE & NATURE  Organizational structure ,the composition of BOD ,extent of professionalisation of management are important factors influencing business decision .  BOD is highest decision making body which sets the direction for the development
    31. 31. Internal Power Relationship Factors like the amount of support the top management enjoys from different levels of employees ,shareholder and BOD have important influence on decision and their implementation. Human Resources – Skills ,Quality ,Morale, Commitment ,Attitude could contribute to Strength & Weakness of an organization .
    32. 32. Company image The image of company matters while raising finance ,forming joint ventures or other alliances ,entering purchase or sale contracts ,launching New Products. Miscellaneous Factors. Physical Assets & Facilities like production capacity ,technology ,distribution logistics .are among the factors which influences the competitiveness of a firm .
    33. 33. Cont …….. e.g. Quality important aspect in Pharma Industry particularly for global player  R & D and Technological capability determine company’s ability to innovate & compete.  Marketing resource quality of work force (sales team) ,brand ,logistics have a direct bearing on marketing efficiency .it also helps in brand extension, New Product development
    34. 34.  Financial factors Financial policies ,financial positions capital structure are also important internal environment affecting business performance ,strategies and decisions
    35. 35. ANSOFF MODEL (PRODUCT / MARKET GROWTH MODEL)  FOUR TYPES OF GROWTH:  MARKET PENETRATION  MARKET DEVELOPMENT  PRODUCT DEVELOPMENT  DIVERSIFICATION
    36. 36. IGOR ANSOFF’S PRODUCT/MARKET EXPANSION GRID Current Product Current Market Market Penetration New Market Market Development New Product Product Development Diversification
    37. 37.  Market Penetration (Current Market –Current Product): Encourage current customers to buy more. Attract competitors customers to switch to its brand Convince non users who resemble current users to start using the company’s product E.g - Pepsodent, Colgate
    38. 38.  Market Development: Geographical expansion Channel expansion : If only present in consumer market, then look at institutional sales also. Geographical expansion: Opening retail outlets in other areas. e.g --- Mc-Donalds, Shoppers’ Stop
    39. 39.  Product development Strategy : Introduce products with new features Introduce different quality versions Alternative product forms Introduce products with new features e.g – LG in colour TVs– Flat TVs, Plasma TVs, LCD TVs, Projection TVs.
    40. 40. Diversification Strategy  Vertical Integration (V I) : When an organization starts making new products that serve its own needs , vertical integration takes place.  V I are of two types--Forward and Backward integration  Backward integration : When a company starts making some or all of its material requirements (Inputs ) it is backward integration.  Forward Integration : moves the company nearer to the ultimate consumer.  E.g If Tata Indica starts making tyres --backward integration  If Sona Steering starts making cars--- its forward integration
    41. 41.  Backward Integration: -- Benefits 1) It ensures smooth supply of materials 2) Better control on quantity and quantity. 3) Results in economies of scale Disadvantages 1) The cost of making may be higher then the cost of buying 2) Exiting the business in future may be more difficult
    42. 42.  Forward Integration : Benefits: 1) It creates a captive demand for the product 2) It generates additional profits . e.g Raymond’s getting into ready made shirts –(Park Avenue, Parx) Disadvantages : 1) The new business may not succeed
    43. 43.  Horizontal Integration : Integration at the same level of business – e.g HLL buying TOMCO Or sister concerns of the same company can be combined into one entity.
    44. 44.  Three types of diversification:-1) Concentric Diversification Strategy : company makes products that have technological and / or marketing synergies with existing product lines , even though the product may appeal to a new class of customers e.g--- A audio cassette/CD company may start making computer CD --A washing machine company starts making dishwasher.
    45. 45.  Horizontal Diversification strategy : Company searches for new products that serve the same customer though technologically unrelated to its current product . e.g – A cassette manufacturing company starts making tray to hold the cassette. A CD company starts making CD boxes
    46. 46.  Conglomerate Diversification : When an organization seeks new businesses that have no relationship to the company’s current technology, products or markets its known as Conglomerate diversification.  e..g : ITC ( Cigarettes, Hotels, Paper ) TATA ( Steel, salt, cement, power, tea, retail, hotels,coffee chain, software) TTK ( Pressure cookers, chemicals, contraceptives, pharmaceuticals) Anchor (consumer electronics, Toothpaste, talcum powder, electrical switches)
    47. 47. Porter's Five Forces (Assessing the Balance of Power in a Business Situation)
    48. 48. The Porter’s 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you’re looking to move into.
    49. 49.  With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.  Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations
    50. 50. Supplier Power: Here an individual assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another etc.. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are.
    51. 51. Buyer Power  it is easy for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else etc. If you deal with few, powerful buyers, they are often able to dictate terms to you.
    52. 52. Competitive Rivalry: the number and capability of competitors – if there are many competitors, and they offer equally attractive products and services, then most likely one will have little power in the situation. If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength.
    53. 53. Threat of Substitution  This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power.
    54. 54. Threat of New Entry  Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
    55. 55. Origins  Albert S Humphrey, one of the founding fathers of what we know today as SWOT analysis.
    56. 56.  SWOT analysis is a tool for helping assess the current situation for the firm.  To generate alternative strategies.  The TOWS matrix is a tool designed to match external opportunities and threats with our internal strengths and weaknesses
    57. 57. Strengths and Weaknesses  Goal: objective assessment of your strengths and weaknesses  relative to competitors  important to customers Note: This is difficult to do well.
    58. 58.  The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations.  SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats.  The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Strengths, Weaknesses, Opportunities, and Threats
    59. 59.           Examples a company (its position in the market, commercial viability, etc) a method of sales distribution a product or brand a business idea a strategic option, such as entering a new market or launching a new product a opportunity to make an acquisition a potential partnership changing a supplier outsourcing a service, activity or resource an investment opportunity
    60. 60. SWOT Analysis Internal Environment Strengths 1. 2. 3. Weaknesses 1. 2. 3. External Environment Opportunities 1. 2. 3. Threats 1. 2. 3.
    61. 61. Strengths              Capabilities? Competitive advantages? USP's (unique selling points)? Resources, Assets, People? Experience, knowledge, data? Financial reserves, likely returns? Marketing - reach, distribution, awareness? Innovative aspects? Location and geographical? Price, value, quality? Accreditations, qualifications, certifications? Processes, systems, IT, communications? Cultural, attitudinal, behavioral? Weaknesses            Gaps in capabilities? Lack of competitive strength? Reputation, presence and reach? Financials? Timescales, deadlines and pressures? Cash flow, start-up cash-drain? Continuity, Effects on core activities, distraction? Reliability of data, plan predictability? Morale, commitment, leadership? Processes and systems, etc?
    62. 62. Opportunities             Market developments? Industry or lifestyle trends? Technology development and innovation? Global influences? New markets, vertical, horizontal? Niche target markets? Geographical, export, import? New USP's? Business and product development? Information and research? Partnerships, agencies, distribution? Seasonal, weather, fashion influences Threats              Political effects? Legislative effects? IT developments? Competitor intentions - various? Market demand? New technologies, services, ideas? Vital contracts and partners? Sustaining internal capabilities? Obstacles faced? Loss of key staff? Sustainable financial backing? Economy - home, abroad? Seasonality, weather effects?
    63. 63. TOWS Matrix From External Analysis (EFAS) From Internal Analysis Opportunities: 1. 2. 3. Strengths: 1. 2. 3. Weaknesses: 1. 2. 3. SO Strategies Use strengths to take advantage of opportunities Threats: 1. 2. 3. ST Strategies Take advantage of Strengths to avoid threats WT Strategies WO Strategies Defensive strategies Use Opportunities to to minimize overcome weaknesses weaknesses and avoid threats Source: Weihrich
    64. 64. TOWS Matrix  Technique used in strategy formulation for combining  External analysis Opportunities Threats  Internal analysis Strengths Weaknesses
    65. 65. PEST ANALYSIS
    66. 66. Benefits  PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business.  A PEST analysis is also used as business measurement tool to assess the market for a business or organizational unit.  The PEST analysis headings are a framework for reviewing a situation, and can also, like SWOT analysis, and Porter's Five Forces model, be used to review a strategy or position, direction of a company.  PEST analysis also works well in brainstorming meetings.
    67. 67.    PEST analysis helps for business and strategic planning, marketing planning, business and product development and research reports. PEST analysis exercises for team building games. It's simple, quick, and uses four key perspectives. As PEST factors are essentially external, completing a PEST analysis is helpful prior to completing a SWOT analysis (a SWOT analysis - Strengths, Weaknesses, Opportunities, Threats - is based broadly on half internal and half external factors). PEST analysis most commonly measures a market; a SWOT analysis measures a business unit, a proposition or idea.
    68. 68. PEST ANALYSIS P-POLIYICAL E-ECONOMICAL S-SOCIAL T-TECNOLOGICAL
    69. 69. POLITICAL
    70. 70.  European/International legislation  Regulatory bodies and processes  Government policies  Government term and change  Trading policies  Funding, grants and initiatives  International pressure groups  Wars and conflicts
    71. 71. Economic
    72. 72.  Home economy situation  Home economy trends  Overseas economies and trends  General taxation issues  Taxation specific to product/services  Seasonality/weather issues  Market and trade cycles  Specific industry factors  Market routes and distribution trends  Customer/end-user drivers  Interest and exchange rates  International trade/monetary issues
    73. 73. Social
    74. 74.  Lifestyle trends  Demographics  Consumer attitudes and opinions  Media views  Law changes affecting social factors  Brand, company, technology image  Consumer buying patterns  Fashion and role models  Major events and influences  Buying access and trends  Ethnic/religious factors  Advertising and publicity 
    75. 75. Technological
    76. 76.  Competing technology development  Research funding  Associated/dependent technologies  Replacement technology/solutions  Maturity of technology  Manufacturing maturity and capacity  Information and communications  Consumer buying mechanisms/technology  Technology legislation  Innovation potential  Technology access, licencing, patents  Intellectual property issues  Global communications
    77. 77. Difference and Relationship PEST and SWOT b/
    78. 78.  PEST is useful before SWOT - not generally vice-versa i.e. PEST helps to identify SWOT factors.  PEST assesses a market, including competitors, from the standpoint of a particular proposition or a business. SWOT is an assessment of a business or a proposition, whether your own or a competitor's.
    79. 79.  PEST becomes more useful and relevant the larger and more complex the business or proposition, but even for a very small local businesses a PEST analysis can still throw up one or two very significant issues that might otherwise be missed.  The four quadrants in PEST vary in significance depending on the type of business, eg., social factors are more obviously relevant to consumer businesses or a B2B business close to the consumer-end of the supply chain, whereas political factors are more obviously relevant to a global munitions supplier or aerosol propellant manufacturer.
    80. 80. VALUE CHAINS  VALUE IS ADDED DURING TRANSFORMATION PROCESSES  MAY BE MULTIPLE FIRMS IN A VALUE CHAIN  WHO SHOULD BE IN VALUE CHAIN?
    81. 81. The Value Chain A framework for identifying core competencies  Inside the firm  In the supply chain  Can be used to  Identify strengths and weaknesses  Identify sources of competitive advantage  Identify market opportunities
    82. 82. The Value Chain Technological Development N Inbound Operations Logistics Outbound Marketing Service Logistics & Sales N Procurement MA RG I Primary Activities Human Resource Management I RG MA Supporting Activities Firm Infrastructure Relationship with Suppliers Elapsed Time - Value added time cost Relationship with Buyers
    83. 83. Primary Activities in the Value Chain  Inbound Logistics    Operations    Materials handling, warehousing, inventory control used to receive, store and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of inputs Take inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc. Outbound Logistics   Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining delivery dates, delivery to the packer or elevator etc.
    84. 84. Primary Activities in the Value Chain  Marketing and Sales  Provide means through which customers can purchase products and to induce them to do so  Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery scheduling  Service  Activities designed to enhance or maintain a product’s value  Timely delivery, identity preservation, ISO9000, certifying as organic, etc.
    85. 85. Supporting Activities in the Value Chain  Procurement  Activities to purchase the inputs needed to produce products  Negotiating with suppliers, standard timing of replenishing parts and tools, setting up buying groups, etc.  Technological Development  Activities that improve the firm’s products and/or processes  Volunteering for test plots, being a part of feeding trials, attending technology seminars/field days, designing equipment to make specifi production tasks more efficient, etc.  Human Resources  Recruiting, hiring, training, developing, and compensating all personnel
    86. 86. Supporting Activities in the Value Chain Human Resource management Procurement Technology Firm Infrastructure Inbound Logistics  Firm    Operations Service Outbound Logistics Marketing and Sales Infrastructure General Management, planning, finance, accounting, legal support, governmental relations, etc. Establishment of accounting practices, management information systems, compliance with environmental regulations, tracking and reporting for government programs, etc. Where strategy development takes place identifying opportunities and threats, resources and capabilities, and support of core competencies
    87. 87. The Result of the Value Chain  Margins  Capture the value from performing value-creating activities as cheaply as possible  The basic idea is that the consumer is willing to pay a certain amount for the value you create. This is depicted as the size of the overall pentagon.  The size of the individual activity boxes represents the cost of performing those particular activities.  Thus, the smaller the size of the individual activity boxes relative to the value the consumer is willing to pay, the greater the MARGIN will be for the firm.
    88. 88. The Value Chain – Grains Farm Technological Development N Inbound Operations Logistics Outbound Marketing Service Logistics & Sales N Procurement MA RG I Primary Activities Human Resource Management I RG MA Supporting Activities Firm Infrastructure Relationship with Suppliers Elapsed Time - Value added time cost Relationship with Buyers
    89. 89. Primary Activities for a Grain Farm Outbound Marketing Operations Logistics Inbound & Sales Logistics Grain Tillage Planning Fertilizer and Fertilizing chemical storage, Spraying custom Cultivate application Harvest of inputs transport to elevator or buyer Grain transport to storage Service On-time delivery Forward contract Fwd. contracts IP Storage Futures Tracing Options QA IP grain Value added grain Relationship with Suppliers Relationship with Buyers
    90. 90. Supporting Activities for a Grain Farm Infrastructure: management, planning, finance, accounting, government compliance, quality control Human Resource: motivation tools, compensation, training, and directing farm employees, including family, management, and laborers Technological Development: research and adoption practices for things like GPS, VRT, GMO’s, No-Till, the Internet, IP storage facilities Procurement: Purchasing inputs: seed, fertilizer, chemicals, fuel, land, Machinery, storage equipment, office supplies, parts, tools, insurance etc. with focus on negotiating capabilities
    91. 91. Thank You 
    92. 92. 

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