Value chain analysis identifies a firm's primary and support activities that add value and looks for ways to reduce costs or increase differentiation. The value chain includes inbound logistics, operations, outbound logistics, marketing and sales, and services. Support activities include procurement, technology development, human resource management, and firm infrastructure. Analyzing a firm's value chain can reveal sources of competitive advantage and opportunities to improve efficiency.

1. VALUE CHAIN ANALYSIS
hain Analysis

2. 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.
Value
Chain
Primary
Activity
Support
Activity

3. 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
 It is a process where a firm identifies its primary
and support activities that add value to its final
product and then analyze these activities to
reduce costs or increase differentiation.

4. Primary activities
 Inbound logistics : Refers to goods being obtained
from the organizations suppliers and to be used for
producing the end product
 Operations : Value is added to the product at this
stage as it moves through the production line
 Outbound logistics:. Distribution of finished goods
is known as outbound logistics.
 Marketing and Sales: The marketing mix is used to
establish an effective strategy, any competitive
advantage is clearly communicated to the target
group through the promotional mix.
 Services: After the product/service has been sold
what support services does the organization offer

5. Support activities
 Procurement: The challenge for procurement is
to obtain the best possible quality available (on
the market) for their budget.
 Technology development: The use of
technology to obtain a competitive advantage is
very important in today’s technological driven
environment.
 Human resource management: The organization
will have to recruit, train and develop the correct
people for the organization to be successful.
 Firm infrastructure: Every organizations needs to
ensure that their finances, legal structure and
management structure work efficiently and helps drive
the organization forward

6. Michael Porter’s model of Value Chain

7. Case Study (Pizza Hut)
Primary Activities
 Inbound Logistics
- Purchasing raw materials like: Dough Cheese
Sauce Fruits and vegetables Spaghetti Salt and
pepper
 Operations
-Preparation of pizza base Customization of pizza
Make pastas and salads On time delivery
 Outbound Logistics
-Transporting pizza bases Serving pizzas hot

8. Continued….
 Marketing and Sales Segmentation
- Target Market Branding Redefining its menu
Introduction of new products Pricing Distribution
Advertising Promotional offers
 Service and Support
-Customer feels comfortable Online orders Home
Delivery Explanation of Value Chain of Pizza Hut:

9. Support Activities
 Infrastructure- Funds collection, Administrative tasks
 Human Resource Management -Managing
employees Training employees Appraisals and
rewards Knowledge transfers Freedom of thoughts
Conducting meetings
 Technology Development- Feedback from customers
Research work Improvising of their products
Innovation Launch of new products Use of IT,
databases Temperature controlled trucks
 Procurement- Acquiring the resources Ingredients
from local suppliers Special ingredients From

10. Conclusion
 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

11. By-
Megha Varma(7282)
Gitika Prachish(7294)