Value chain analysis

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)

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)

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.

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

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

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
(general and admin.)
 Tech. development
 Procurement

Value Chain Model
from Michael E. Porter’s Competitive Advantage
Procurement
Inbound
Logistics
Operation
s
Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES

PRIMARY ACTIVITIES
1.INBOUND LOGISTICS
- CONCERNED WITH RECEIVING, STORING, DISTRIBUTING INPUTS (e.g.
HANDLING OF RAW MATERIALS, WAREHOUSING, INVENTORY
CONTROL)
2. OPERATIONS
- COMPRISE THE TRANSFORMATION OF THE INPUTS INTO THE FINAL
PRODUCT FORM (E.G. PRODUCTION, ASSEMBLY, AND PACKAGING)
3. OUTBOUND LOGISTICS
-INVOLVE THE COLLECTING, STORING, AND DISTRIBUTING THE PRODUCT
TO THE BUYERS (e.g. PROCESSING OF ORDERS, WAREHOUSING OF
FINISHED GOODS, AND DELIVERY)

PRIMARY ACTIVITIES
4. MARKETING AND SALES
-Identification of customer needs and generation of sales.
(e.g. ADVERTISING, PROMOTION, DISTRIBUTION)
5. SERVICE
-INVOLVES HOW TO MAINTAIN THE VALUE OF THE PRODUCT
AFTER IT IS PURCHASED.(e.g. INSTALLATION, REPAIR,
MAINTENANCE, AND TRAINING)

Value Chain Model
from Michael E. Porter’s Competitive Advantage
Procurement
Inbound
Logistics
Ops. Outbound
Logistics
Sales &
Marketing
Service and
Support
PRIMARY ACTIVITIES
SUPPORT
ACTIVITIES

SUPPORT ACTIVITIES
1.FIRM INFRASTRUCTURE
The activities such as Organization structure, control system, company
culture are categorized under firm infrastructure.
2.HUMAN RESOURCE MANAGEMENT
Involved in recruiting, hiring, training, development and compensation.
3.TECHNOLOGY DEVELOPMENT
These activities are intended to improve the product and the process, can
occur in many parts of the firm.
4.PROCUREMENT
Concerned with the tasks of purchasing inputs such as raw
materials, equipment, and even labor.

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

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.

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.

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

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.

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.

 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

WALLMART
(A Service Based Company)

THANK U………
PRESENTED BY:
JAYA PRAKASH NAIDU.YALLA(09MBI023)
KUNDANA .A(09MBI065)
D.S.C.GUPTA(09MBI073)
MONISH.R.M.(09MBI105)
SANKHAR(09MBI125)
VEENA V(09MBI124)

• 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+ltd&source=bl&ots=8VLnwpIieL&sig=uumCnws2Qd79EraSP-
KGVauJDtI&hl=en&sa=X&ei=n8BCUej9IcOHrQfU2YDwBw&sqi=2&ved=0CEgQ6AEwBA#v=one
page&q=vcm%20tata%20motors%20ltd&f=false
(263 page)
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

• 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,...

Value chain analysis

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