This value chain analysis examines the primary and supporting activities of a large e-commerce company. The primary activities include inbound logistics like inventory management and fulfillment centers, operations like marketplace operations and packaging, outbound logistics like order fulfillment and dispatch, marketing and sales like promotions and customer services, and services like customer support. The supporting activities include human resources, technology development like AI and AWS, procurement, finance, and legal functions. The analysis highlights how the activities work together to deliver customer value in a low-cost and customer-centric manner.

1. It is a very flexible strategy tool for
looking at your business, your
competitors & the respective places in
the industry’s value system.
It helps you to understand the organization
issues involved with the promise of making
customer value commitments and focuses
attention on the activities needed to deliver the
value proposition.
It has to be adapted to a particular business
attention & that can be a disadvantage since,
to get the best from the value chain, it’s not
“plug and play”.
Many people are familiar with the
value chain but few are experts in its
use. Business info. systems are often
not structured in a way to make it
easy to get information.
Advantages and Disadvantages
It can be used to diagnose and
create competitive advantages
on both cost and
differentiation.
The scale & scope of this can be intimidating. It
can take a lot of work to finish a full value chain
analysis for your company and competitors so
that you can identify and understand the
difference.

2. Value Chain Vs. Supply Chain
Customer
Satisfaction
Planning &
Analysis
Innovation
Process
Product
Development
Supplier Alignment
& Sourcing
VALUE CHAIN PROCESS
(Products) (Customers)
Material
Suppliers
Logistics
Management
Production
Steps
Sales &
Marketing
Customer
Satisfaction
SUPPLY CHAIN PROCESS (Customer)
(Supplier)

3. Inbound Logistics Operations Marketing & Sales Services
Value Chain Analysis
• Real-time inbound
inventory data
• Location of distribution
facilities
• Trucks
• Warehouse
• Material Handling
• Standardized model
• Access to real-time sales
and inventory system
• Pricing
• Communication
• Promotion
• Product based on
community needs
• Low prices
• Delivery
• Installation
• Repair
• Greeters
• Customer service focus
Firm Infrastructure
HR Management
Technology Development
Procurement
Management, finance, legal, planning
Professional development, employee relation, performance appraisal, wages etc.
Integrated supply chain system, real-time sales information
Real-time inventory, communication with suppliers, purchase supplies & materials
MARGINS
SUPPORTING
ACTIVITIES
PRIMARY
ACTIVITIES
Outbound Logistics
• Order processing
• Full delivery trucks

4. Value Chain Analysis
Services
Inbound Logistics Operations Outbound Logistics Marketing & Sales
• Vertically integrated suppliers
• Decentralized fulfillment
centers to route the items a
put-away location
• Item replenishment
• Quality control, fulfillment
from prime loc
• Marketplace operation,
packaging
• Device and content creation
• AI - software development
• AWS Operations
• Order fulfillment
• Order handling and dispatch
• Invoicing
• Amazon prime
• Earth’s most customer centric
company
• Hassel free return
• Customer services
• Promotions
• Order & Customer tracking
• Segmentation
• Warranty and support for
Marketplace, AWS, Amazon
devices and other services &
products
• Education & training
HR & Finance & Legal :
Hiring talented people, creating sustainable operating cashflow & risk mitigation.
Technology :
Advanced customer database and analytics tools for recommendation and personalization. Scalable AWS for Amazon.com’s technology infrastructure, B2C and B2B customers.
Fully optimized as well as automated warehouse & distribution centers along with robotics technology.
Procurement :
Vast number of vertically integrated suppliers
PRIMARY
ACTIVITIES
SUPPORTING
ACTIVITIES
Customer
Value

5. Value Chain Analysis Example
FIRM’S PRIMARY
ACTIVITIES
Design and engineering
Purchasing materials and
components
Assembly
Testing and quality
control
Sales and marketing
Distribution and dealer
support
TOTAL COST AND
IMPORTANCE
$164M less important $410M very important $524M very important $10M is not important $384M is just important $230M is less important
COST DRIVERS
Number & frequency
of new models
sales per model
Order size avg. value of
purchase per supplier,
location
of suppliers
Scale of plant
capacity utilization,
location of plants
Level of quality
targets frequency
of defects
Size od ads budget
strength of existing
reputation sales volume
Number of dealers, sales
per dealer, frequency of
defects required recall
LINK BETWEEN
ACTIVITIES
• High-quality assembling process reduces defects and cost in quality control and dealer support activities.
• Location plants near the cluster of suppliers or dealers reduce purchasing and distribution costs.
• Fewer model design reduce assembling costs
• Higher order sizes increase warehousing costs.
OPPORTUNITIES OF
REDUCING COSTS
• Create just one model design for different regions to cut costs in designing and engineering, to increase order sizes of same material,
to simplify assembling and quality control processes and to lower marketing costs.
• Manufacture components inside the company to eliminate transaction costs of buying them in the market to optimize plant utili zation.
This would also lead to greater economies of scale.
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