Many organisations try to create value for their customers, within which they provide high quality goods and services to gain a competitive advantage over their rivals. In order for a firm to build such value for customers, they must engage in adequate strategic decision making, which involves choosing and implementing actions that would influence the firm's ability to achieve its objectives. Value chain analysis can be used when making decisions as it aids an organisation in creating value and a competitive advantage by integrating its business system into a series of value-generating activities, functions and business processes. This analysis is very useful as it aids organisations in identifying ways to create value and analyse ways to maximize such value.
Michael Porter's generic value chain model was introduced, which entails the steps/sequential activities an organisation should follow in order to create value. The value chain analysis model has two main types of activities: Primary activities, where the value is created for the customer and Secondary activities, which are additional functions used to assist the primary activities.
These activities include Inbound Logistics, Operations, Outbound Logistics, Sales & Marketing, Service and Profit Margin. These activities are supported by functions such as Firm Infrastructure, Human Resource Management, Technology Development and Procurement.
The value chain process commences from inbound logistics which is the collection and storage of raw materials, which is then distributed to the manufacturing section. One example of an activity within this section is material handling. The operations process e.g. maintenance of the equipment, follows inbound logistics, where the raw materials are converted into the finished products and services. The finished products are then warehoused and dispersed to customers and this step is known as the outbound logistics. Some examples of the associated activities are packaging and transporting. The next step which is...