Value-Chain Analysis
Value-chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. The Figure 1 below illustrates the essence of value chain analysis. It is important to note that the pattern of Dell value chain management has been extensively imitated by other companies, including companies outside of consumer technology industry due to its evident contribution to the success of the company. Figure 1 Value Chain Analysis Inbound logistics. Dell works with more than 165,000 channel partners in inbound logistics and provides USD 125 million partner incentives and investments annually[1]. The company utilizes Just-in-Time (JIT) philosophy in dealing with inbound logistics. Thanks to this strategy, Dell is able to save on huge inventory costs and sustain cost leadership for the majority of its products and services. Customer orders are registered by Dell and its vendors simultaneously by an integrated system. Then, materials are shipped by suppliers within 2 hours and shortly received at Dell’s assembly unit due to geographical proximity (see Figure 2 below). Operations. The main distinctive point between operations of Dell and its competitors relates to the fact that Dell is not a computer manufacturer; the company merely assembles parts manufactured by other companies. At the same time, high level of product customization is adapted as one of the bases of competitive advantage by the business. Therefore, operations mainly consist of three stages – assembly of stardard parts, installation of custom parts and testing product configurations (see Figure 2 below). Figure 2 Dell’s value chain[2] Outbound logistics consists of five stages as marked in red color in Figure 2 above. Thanks to the practice of mass customization, Dell is able to complete order fulfilment in a short duration of time. Generally, Dell completes customer shipments in a timely basis,…
Value-chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. The figure below illustrates the essence of value chain analysis. Inbound logistics. Water is the main ingredient for all products manufactured by Coca Cola Company and the company occasionally faces significant challenges in accessing this particular raw material. Coca Cola uses high fructose corn syrup (HFCS) extensively and this raw material is purchased from US-based suppliers and delivered via trucks. There are also some ingredients that have to be sourced internationally. For example, orange juice and orange juice concentrate is sourced from Florida and Southern Hemisphere, particularly Brazil. For international purchases inbound logistics are facilitated via ships and trucks. Coca Cola values diversity among its suppliers. In 2013, $952 million were spent on diverse suppliers, an increase of 14.8% compared to the previous year. Operations. Coca-Cola operating segments are divided into the following 7 groups: Eurasia and Africa Europe Latin America North America Asia Pacific Bottling Investments Corporate The Coca Cola system is not a single entity from legal and managerial points of view. Coca Cola manufactures and sells concentrates, beverage bases and syrups to its bottling partners, maintains ownership of the brand and develops and applies marketing strategy. Bottling partners, entities that do not belong to Coca Cola, do manufacturing, packaging, merchandising and they distribute the final product to customers and vending partners. Outbound logistics. Coca Cola Company sells its products in more than 200 countries and understandably claims to operate the world’s largest beverage distribution system[1]. Distribution channels utilized by Coca-Cola consists of distribution operations operated or controlled by the company, independent bottling partners, distributors, wholesalers and retailers. The five major bottling partners listed in Table 3 accounted for 33% of the total unit case volume…
Strategic Theory: Value-Chain Analysis The model of Value-Chain Analysis introduced by Michael Porter (1985) divides business activities into two groups: primary activities and support activities. Primary activities include inbound logistics, operations, outbound logistics, marketing sales, and service and they are related to producing products and services in a direct manner. Support activities, on the other hand, as the name suggests needed to support primary activities of the firm and they consist of firm infrastructure, human resources management, technology development, and procurement. Core benefit of Value-Chain Analysis framework relates to identification and utilisation of opportunities to add more values to certain business processes with positive implications to overall level of competitiveness of the firm. In other words, application of Value-Chain Analysis model provides platform for analysing business processes in an individual manner, so that competitive advantage can be obtained in relation to a specific business process. Moreover, Value-Chain Analysis can be applied to increase the levels of overall strategic competency of the business and strategic competency can be explained as “what in business units does exceptionally well -such as a customer relationship programme, manufacturing, or promotion – that has strategic importance to that business” (Aaker and McLoughlin, 2010, p.7) Inbound logistics relates to a set of activities associated with receiving materials and warehousing and it also includes supply-chain management practices. Operations, on the other hand, relate to the process of transformation of inputs into outputs. Outbound logistics is associated with processing of orders and distribution of products and services. Marketing and sales refers to activities of development and implementation of integrated marketing strategy of the firm. The latest trends in marketing and sales activities can be specified as increasing integration of social media, focus on corporate social responsibility and customer data privacy. Service activities within the framework of Value-Chain Analysis relate to…
Porter’s (1985) value chain analysis illustrates the manner in which various business activities relate to the competitive advantage of firms. The model divides business activities in primary and support activities. Primary activities deal with the delivery of products in a direct manner, whereas the main aim of support activities relate to increasing the levels of effectiveness of various business processes. Primary Activities Inbound logistics include activities associated with bringing and storing of all external materials. For Illy, this comprises harvesting, parchmenting, quality control and purchasing within countries where the coffee beans are grown, shipping the beans in bags to company plant in Trieste, Italy. Expenses associated with inbound logistics account for significant amount due to the large distance between operations plant in Trieste and purchasing plants in Africa, Asia and Latin America continents and this can be specified as one of the major factors causing the levels of overall costs to increase. Within the scale of ‘Illy’s and Boos Cupcakery’ specific branch, on the other hand, inbound logistics involve the delivery of necessary products and ingredients on a daily basis, according to the order sent by the shift manager on the previous day. Operations relate to the ways in which outputs are created out of inputs. Illy operations mainly include blending, roasting and packaging coffee beans in company plant in Trieste. Basically, internal operations consist of a set of consequent processes as a result of which coffee beans in bags are turned into packaged products in paper packages and metal cans depending on the nature of each individual product. In case of ‘Illy’s and Boos Cupcakery’ in Bristol operations involve physical preparation of coffee and other beverages and food within the store. Outbound logistics activities include all activities involved in sending ready products to consumers. Illy products…
Value network analysis can be applied in relation to Starbucks operations in the UK in order to “explore the structure of its interaction with several actors in a network of relationships” (Zsidisin and Ritchie, 2008, p.40). In simple terms, value network analysis can be specified as more sophisticated version of Porter’s Value Chain analysis in a way that the former framework explains the impact of each network group in a multidirectional manner. For example, as it is illustrated in the following figure, media as an important network group within Starbucks value network has direct implications on the performance of three other individual network groups: suppliers, company operated stores, and licensed stores. This specific interrelationship can not be effectively presented within Porter’s value chain network, due to the fact that this framework is constructed in a rigid and sequential manner. The following table briefly explains the nature of impact each individual network group within Starbucks value network Network group Comments Company operated stores The largest source of revenues from the sale of drink and food products Licensed stores Licensed stores contributed to 9% of total revenues during the financial year of 2011 (Annual Report, 2011). Suppliers This network group comprises suppliers of coffee beans, food products, and various tools and technologies.Suppliers are used by Starbucks for company operated stores, whereas, licensed stores deal with their suppliers in a direct manner. Farmer Support Centres are maintained in Rwanda, Costa Rica and other locations UK Government agencies UK government agencies as an independent network group can impact both, company operated stores, as well as, licensed stores Media Has great impact on the performance of both, company operated and licensed stores. Recently, this impact has been highly negative due to extensive coverage of tax issues from a critical viewpoint.Unlike other network groups, media…