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Value chain with example of IT industry
Value chain analysis examines the internal activities a firm engages in to deliver a product or service. It identifies primary activities like inbound logistics, operations, outbound logistics, marketing and sales, and service, as well as support activities including procurement, technology development, human resources, and general administration. Google relies on over 70 offices globally for operations and uses marketing through online and offline channels, though sales are predominantly online. Customer service at Google is provided through online forums rather than phone support due to the large customer base.
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Value chain with example of IT industry
- 1. Assessing the Internal Environmentof the Firm
- 2. Value-Chain Analysis Value-chain analysis a strategic analysis of an organization that uses value creating activities. Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue
- 3. Value-Chain Analysis Primary activities contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale. inbound logistics, operations, outbound logistics, marketing and sales, and service
- 4. Value-Chain Analysis Support activities activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities procurement, technology development, human resource management, and general administration.
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- 6. Primary Activity: InboundLogistics Associated with receiving, storing and distributing inputs to the product Location of distribution facilities Warehouse layout and designs
- 7. Primary Activity: Operations Associatedwith transforming inputs into the final product form Efficient plant operations Incorporation of appropriate process technology Efficient plant layout and workflow design
- 8. Primary Activity: OutboundLogistics Associated with collecting, storing, and distributing the product or service to buyers Effective shipping processes to provide quick delivery and minimize damages Shipping of goods in large lot sizes to minimize transportation costs.
- 9. Primary Activity: Marketingand Sales Associated with purchases of products and services by end users and the inducements used to get them to make purchases Innovative approaches to promotion and advertising Proper identification of customer segments and needs
- 10. Primary Activity: Service Associatedwith providing service to enhance or maintain the value of the product Quick response to customer needs and emergencies Quality of service personnel and ongoing training
- 11. Support Activity: Procurement Functionof purchasing inputs used in the firm’s value chain Procurement of raw material inputs Development of collaborative “win-win” relationships with suppliers Analysis and selection of alternate sources of inputs to minimize dependence on one supplier
- 12. Support Activity: Human ResourceManagement 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 Reward and incentive programs to motivate all employees
- 13. Support Activity: Technology Development Relatedto 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 Excellent professional qualifications of personnel
- 14. Support Activity: General Administration Typicallysupports the entire value chain and not individual activities Effective planning systems Excellent relationships with diverse stakeholder groups Effective information technology to integrate value-creating activities
- 15. Value chain Google Inboundlogistics Google does not reveal the details of its supply-chain management and inbound logistics to the public. The company is reported to be attempting a digital transformation in supply-chain via projects aimed at automated drone delivery of products. Google maintains a dedicated supplier site, where suppliers can submit invoice for payment, check invoice status and deal with a range of other administrative aspects of their cooperation with the company in a convenient manner. 3-15
- 16. Operations Google operates viamore than 70 offices in more than 40 countries internationally. Google offices are famous for their creative design and the presence of distinctive features such as sharing cubes, video games, pool tables, pianos, cafes and others. Google headquarters in Mountain View, California consists of about 4.8 million square feet of office and building space, along with about 15 acres of land that can be ground for more office space in the future. All spheres of Google’s operations are guided by its organizational culture based on challenging the status quo and adopting an unconventional approach in getting things done. 3-16 Value chain Google
- 17. Outbound logistics Online searchand integration of advertisements into search results represents Google’s core business and there is no outbound logistics associated with running this business. Google also sells physical technological products such as Smart watches, Nexus Phones, Chrome cast, Chrome books, technological accessories and other products via its website www.store.google.com. In 2015 Google also opened its first fully-branded physical store in London. 3-17 Value chain Google
- 18. Marketing and sales Google’smarketing strategy relies on integration of online and offline communication channels to communicate the marketing message. Popular components of marketing communication mix such as advertising, events and experiences and public relations are used by Google extensively, whereas the company uses sales promotions and direct marketing sparingly. Google sales are predominantly conducted via online sales channel and the company started to utilize traditional offline sales channel only recently. 3-18 Value chain Google
- 19. Service Google forums playan instrumental role in terms of assisting customers to deal with a wide range of technical and other issues. Interestingly, as of May 2015, attempts to find Google’s customer services phone numbers have proved to be unsuccessful. This must be due to cost considerations taking into account hundreds of millions of Google customers around the globe. 3-19 Value chain Google
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Editor's Notes
- #3 Creating value for buyers that exceeds the costs of production is a key concept used in analyzing a firm’s competitive position.
- #7 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
- #8 Associated with transforming inputs into the final product form Efficient plant operations Incorporation of appropriate process technology Quality production control systems Efficient plant layout and workflow design
- #9 Associated with collecting, storing, and distributing the product or service to buyers Effective shipping processes to provide quick delivery and minimize damages Efficient finished goods warehousing processes Shipping of goods in large lot sizes to minimize transportation costs. Quality material handling equipment
- #10 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
- #11 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
- #12 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
- #13 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 absenteeism Reward and incentive programs to motivate all employees
- #14 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
- #15 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 organizational culture, reputation, and values