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MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
VALUE
CHAIN
ANALYSIS
MBA. MBI. PMP. ING.
Giovanni Alfonso Huanqui Canto
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
“….We have learned that it is NOT technology that 
creates a competitive edge, but the management 
process that exploits technology…”
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
VALUE
THE VALUE IS THE TOTAL AMOUNT (i.e. TOTAL 
REVENUE) THAT BUYERS ARE WILLING TO PAY FOR 
A FIRM’S PRODUCTS. 
THE DIFFERENCE BETWEEN THE TOTAL VALUE (OR 
REVENUE) AND THE TOTAL COST OF PERFORMING 
ALL OF THE FIRM’S ACTIVITIES PROVIDES THE 
MARGIN .
THE VALUE CHAIN IS A TOOL DEVELOPED BY DR. 
MICHAEL PORTER(HARVARD BUSINESS SCHOOL)
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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Value Chain
(Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985).
It evaluates which value each particular activity adds to the 
organizations products or services. 
This idea was built upon the insight that an organization is more 
than a random compilation of machinery, equipment, people and 
money. 
Only if these things are arranged into systems and systematic
activates it will become possible to produce something for which 
customers are willing to pay a price. 
Porter argues that the ability to perform particular activities and 
to manage the linkages between these activities is a source of 
competitive advantage.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
What is the value chain?
Porter’s definition includes all activities to 
design, produce, market, deliver, and support 
the product/service.
 The value chain is concentrating on the activities starting with raw 
materials till the conversion into final goods or services.
Two categories:
Primary Activities (operations, distribution, sales)
Support Activities (R&D, Human Resources)
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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TYPES OF VALUE CHAIN:
Value Chain is categorized into types based on the type of 
organizations.
◦Manufacturing based.
◦Service based.
◦Both manufacturing and service based.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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What is value chain analysis?
Used to identify sources of competitive 
advantage 
Specifically:
◦ Opportunities to secure cost advantages
◦ Opportunities to create product/service differentiation
Includes the value‐creating activities of all 
industry participants
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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Typical Value Chain Analysis
Analysis of own value chain – which costs are 
related to what activities
Analysis of Customer value chain
Identification of cost advantage
Identification of potential “value” added for the 
customer—lower cost/high performance‐where 
does customer see “value”
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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Margin
Margin’ implies that organizations realize a profit 
margin that depends on their ability to manage the 
linkages between all activities in the value chain. 
Organization is able to deliver a product / service for 
which the customer is willing to pay more than the sum 
of the costs of all activities in the value chain.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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Value Chain Model
(FISH BONE DIAGRAM)
Firm Infrastructure (General Management)
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Ops. Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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TYPES OF FIRM ACTIVITIES
Primary activities:
Those that are involved in the 
creation, sale and transfer of products 
(including after‐sales service)
Inbound logistics
Operations
Outbound logistics
Sales and marketing
Service and support
Support Activities:
Those that merely support the primary 
activities
Human resources management
(general and admin.)
Tech. development (including R&D)
Procurement
Infrastructure (systems for 
planning, finance, quality, 
information management etc.).
Each of these primary activities is linked to 
support activities which help to improve their 
effectiveness or efficiency. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
PRIMARY ACTIVITIES
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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Value Chain Model
from Michael E. Porter’s Competitive Advantage
Firm Infrastructure (General Management)
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Operation
s
Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
1.INBOUND LOGISTICS 
‐ CONCERNED WITH RECEIVING, STORING, DISTRIBUTING 
INPUTS (e.g. HANDLING OF RAW MATERIALS, 
WAREHOUSING, INVENTORY CONTROL) 
Here goods are received from a company's suppliers. They are 
stored until they are needed on the production/assembly 
line. Goods are moved around the organization. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
2. OPERATIONS 
‐ COMPRISE THE TRANSFORMATION OF THE INPUTS INTO THE 
FINAL PRODUCT FORM (E.G. PRODUCTION, ASSEMBLY, AND 
PACKAGING) 
This is where goods are manufactured or assembled. 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.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
3. OUTBOUND LOGISTICS
‐INVOLVE THE COLLECTING, STORING, AND DISTRI BUTING THE 
PRODUCT TO THE BUYERS (e.g. PROCESSING OF ORDERS,    
WAREHOUSING OF FINISHED GOODS, AND DELIVERY) 
The goods are now finished, and they need to be sent along the 
supply chain to wholesalers, retailers or the final consumer.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
4. MARKETING AND SALES
‐Identification of customer needs and generation of sales.
(e.g. ADVERTISING, PROMOTION, DISTRIBUTION)
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. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
5. SERVICE 
‐INVOLVES HOW TO MAINTAIN THE VALUE OF THE 
PRODUCT
AFTER IT IS PURCHASED.(e.g. INSTALLATION, REPAIR,
MAINTENANCE, AND  TRAINING)
This includes all areas of service such as installation, after‐
sales service, complaints handling, training and so on.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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SUPPORT ACTIVITIES
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
Redglobeperu.com
Value Chain Model
from Michael E. Porter’s Competitive Advantage
Firm Infrastructure (General Management)
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Ops. Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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SUPPORT ACTIVITIES
1.FIRM INFRASTRUCTURE
The activities such as Organization structure, control system, 
company culture are categorized under firm infrastructure.
This activity includes and is driven by corporate or 
strategic planning. It includes the Management 
Information System (MIS), and other mechanisms 
for planning and control such as the accounting 
department.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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SUPPORT ACTIVITIES
2.HUMAN RESOURCE MANAGEMENT  (HRM)
Involved in recruiting, hiring, training, development and 
compensation.
Employees are an expensive and vital resource. An 
organization would manage recruitment and 
selection, training and development, and rewards 
and remuneration.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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SUPPORT ACTIVITIES
3.TECHNOLOGY DEVELOPMENT 
These activities are intended to improve the product and the 
process, can occur in many parts of the firm.
Technology is an important source of competitive advantage. 
Companies need to innovate to reduce costs and to protect and 
sustain competitive advantage. This could include production 
technology, Internet marketing activities, lean manufacturing, 
Customer Relationship Management (CRM), and many other 
technological developments. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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SUPPORT ACTIVITIES
4.PROCUREMENT
Concerned with the tasks of purchasing inputs such as raw 
materials, equipment, and even  labor.
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. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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USES OF VALUE CHAIN ANALYSIS:
The sources of the competitive advantage of a firm can be seen 
from its discrete activities and how they interact with one  one 
another. 
The value chain is a tool for systematically examining the activities 
of a firm and how they interact with one another and affect each 
other’s cost and performance. 
A firm gains a competitive advantage by performing these 
activities better or at lower cost than competitors.
Helps you to stay out of the “No Profit Zone”
Presents opportunities for integration
Aligns spending with value processes
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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VERTICAL LINKAGES:
LINKAGES CAN ALSO EXIST OUTSIDE THE FIRM; FOR INSTANCE 
THERE IS A LINKAGE BETWEEN A FIRM’S CHAIN AND THE VALUE 
CHAIN OF ITS SUPPLIERS AND CHANNELS.
e.g. THE ACTIVITIES OF THE RAW MATERIALS SUPPLIERS AFFECT 
THE ACTIVITIES OF THE FIRM. SIMILARLY, THE ACTIVITIES OF THE 
DISTRIBUTOR ALSO AFFECT THE FIRM.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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Value Chain System
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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APPLYING THE VALUE CHAIN TO AN INDUSTRY
THE VALUE CHAINS OF THE DIFFERENT FIRMS WITHIN 
AN INDUSTRY VARY FROM ONE ANOTHER.
IN FACT, THE DIFFERENCES IN THE VALUE CHAINS 
AMONG THE DIFFERENT INDUSTRY PLAYERS PROVIDE 
THE SOURCE OF COMPETITIVE ADVANTAGES BETWEEN 
THESE PLAYERS. 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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TATA MOTORS
(A Manufacturing Based Company)
Value Chain & Value System of TATA motors
Inbound 
Logistics
Operations Marketing Service
Outbound 
Logistics
Suppliers , Contractors
SAP , VCM
SAP , CRM ‐ DMS
Strategic Alliances
Transporters, Convoy Drivers 
Association
Dealer Network, Marketing 
Research Firms, Vehicle 
Financing
Regional Warehouses, Dealer 
Workshops, Distributors, TASS
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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PRIMARY ACTIVITIES
Inbound Logistics
 Long term contract with service provider’s – transporters and 
agents.
 Personnel at regional offices for over seeing the smooth transit 
of goods.
 Transparency and monitoring through deployment of IT – all 
transactions through SAP.
 DTL (daily transport logistics) supplies for critical high value 
items.
 Efficient storage facilities – easy storage and retrieval. 
Operations
 Capital Equipment Manufacturing division – tooling development capabilities 
of global standard.
 Apprentice Trainee Course – ensuring stable source of skilled manpower.
 Kaizen & TPM(total productive management) team – continuous drive to 
improve efficiencies.
 Automated manufacturing processes.
 Distributed manufacturing – Assembly units at South Africa, Thailand, 
Bangladesh, Brazil etc.
 Maintenance – technical competence.
 Capacity Utilization – Mercedes Benz cars make use of Tata Motors paint shop 
facilities.
Outbound Logistics
 Stockyards, all across the country.
 Long term contracts with transporter’s – higher volume of 
business to transporters ensures competitive price.
 Regional Sales Office and Vehicle Dispatch Section linked through 
SAP. 
 Efficient security system for prevention of any kind of pilferage.
Marketing & Sales
 Structured approach to understanding the requirements of individual customers 
– QFD’s conducted at regular intervals.
 Clear identification of product requirements, leading to development of 
innovative products – Tata 207 DI, Tata Ace
 Pan India presence and global footprint.
 Independent teams for addressing the requirements of institutional customers –
Defense, State Transport Units
 Helping to augment the scarce resources – Fiat selling vehicles through Tata 
dealerships, in return Tata has access to Fiat’s technology and unutilized capacity.
 Quick assessment of the changing market dynamics and consumer preferences –
Tata 407 LCV 
 Large network of dealers – use of technology (CRM‐DMS).
Service
 Easy availability of spare parts.
 Efficient collection of data from field and communication to the 
respective plants.
 Pan India presence, as well as global presence.
 Large network of workshops – Dealer workshops and TASS.
 Training facilities – for dealer end and TASS personnel.
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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SUPPORT ACTIVITIES
Procurement
 E procurement initiative.
 Global Sourcing Team – China , a key destination for sourcing 
essential items like tires, power steering units etc., Steel procured 
from Belarus
 Long term relationships with a stable and loyal pool of suppliers.
 Technology driven procurement – SAP and VCM.
 Strategic subsidiaries & JV’s – TACO group of companies , Tata 
Cummins
 Centralized Strategic Sourcing for key components – FIP’s, Steel 
etc.
 Group resources – Tata Steel and Tata International .
 Localized supplier base at mfg. locations – low inventory levels.
Technology Development
 Approximately 2% of the annual profits of the company invested 
in research and development.
 Knowledge portal – helps employees keep abreast with the latest 
technologies.
 Extensive prototype building and testing facilities.
 Strategic partnerships – MDI (France), Fiat etc.
 Formal benchmarking process.
 “Technology Day” organized across all plant locations.
Human Resource
 Vast pool of technically competent engineers and managers.
 Focus on development of technical capabilities – Technical 
Training Center’s, Alliance with technical Institutes
 Focus on development of managerial capabilities – MTC’s , TMTC, 
executive training programs at premier business schools
 Career advancement schemes – ESS, FTSS 
Firm Infrastructure
 Multi – Location facilities
 Strong leadership – under the aegis of Tata Sons 
 Best in class prototype building facilities
 Technology – SAP
 Large product portfolio
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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WALLMART
(A Service Based Company)
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
oxfordgroup.edu.pe
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WALLMART’S VALUE CHAIN
IKEA has quickly evolved from a local Swedish home furnishing 
manufacturer into the largest home furnishing company in the 
world; partly by convincing their customer to perform the 
transport and assembly processes of the furniture manufacturing 
value chain.  They have executed their strategy by building a 
worldwide sourcing network of high quality global manufacturers 
to support their growth.
http://www.ichnet.org/ICH%20Value%20Chain%20White%20Paper%20v2.1.doc
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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CRM Initiatives at TATA Motors Ltd.
Given that the customer is king (or queen), it would be logical to presume that establishing — and
nurturing — a relationship with such royalty is a priority for enterprises looking to sell a product or
service. Fact is, it may be a priority but organisations rarely pay more than lip service to what goes
by the grandiose nomenclature of customer relationship management. For Tata Motors, though, this
has always been an imperative.
It made eminent sense for India’s premier automobile company — with over 1 million customers,
22,000 employees and a geographically fragmented business that operates out of 1,600 locations in
a notoriously cyclic business environment — to put many eggs in the relationship management
basket. But this was an idea cooked in the cauldron of adversity.
Tata Motors got started on what it has tagged the customer relationship management-dealer
management system (CRM-DMS) at the turn of the millennium, when it was battling to regain
relevance at a difficult time in its history. That’s when it realised that survival in the auto business
depended on managing its relationships with its customers, dealers and anyone else who had a deep
connection with the mother company.
This was no mean task, considering the scale and complexity of the issues involved. Two
parameters — customers, and their interface with the company, the dealers — were the critical
links in a complex chain that Tata Motors had to deal with. The solution led to the emergence of
Tata Motors’ integrated CRM-DMS, which is today the largest such application in the automobile
industry worldwide, linking to more than 1,200 dealers across India and tracking the needs of some
25,000 customers.
Tata Motors had no standard or benchmark to model its solution on when the relationship concept
was first considered, back in 2002. The company realised that it had to look at the business in a
fundamentally different way. Instead of selling to the customer,...
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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http://www.srpgroup.co.in/logistics/companies/tatamotors.htm
http://www.tatamotors.co.th/en/careers‐detail.php?c=33 
http://www.fvlmagazine.com/Article.aspx?aid=161 
http://www.sap.com/india/about/company/successes/pdfs/Tata_Motors.pdf 
http://archive.ciol.com/ec/cio‐speak/tata‐motors‐implements‐sap‐for‐end‐to‐end‐supply‐chain‐
integration/151207102235/0/ 
http://books.google.co.in/books?id=Q2MNPPUq1v0C&pg=PA262&lpg=PA262&dq=vcm+tata+motors+l
td&source=bl&ots=8VLnwpIieL&sig=uumCnws2Qd79EraSP‐
KGVauJDtI&hl=en&sa=X&ei=n8BCUej9IcOHrQfU2YDwBw&sqi=2&ved=0CEgQ6AEwBA#v=onepage&q=v
cm%20tata%20motors%20ltd&f=false  
http://customercare‐cv.tatamotors.com/customer‐care/customer‐services.asp 
http://suppliers.tatamotors.com/Project_Docs/rfq_terms_conditions.pdf 
http://customercare.tatamotors.com/manual/indigo‐XL‐OMSB.pdf 
http://www.indiastudychannel.com/projects/4754‐Tata‐motors.aspx 
MBA. MBI. PMP. ING.          Giovanni  Alfonso  Huanqui  Canto
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