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Value Chain Analysis For Students

The document outlines steps in value chain analysis including breaking down a firm into key activities, analyzing each activity to reduce costs and increase value, and deciding on an activity-based strategy. It also provides a template to analyze smartshoe's key activities and their drivers to find ways to improve performance.

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Anand Verma
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60 views2 pages

Value Chain Analysis For Students

The document outlines steps in value chain analysis including breaking down a firm into key activities, analyzing each activity to reduce costs and increase value, and deciding on an activity-based strategy. It also provides a template to analyze smartshoe's key activities and their drivers to find ways to improve performance.

Uploaded by

Anand Verma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Steps in Value Chain Analysis

1. Use the value chain template to break down the firm into its
key activities (and if the information is available, competitors’ key
activities).
2. Analyze each key activity and its drivers to look for ways to reduce
the firm’s cost and/or increase the buyers’ willingness to pay.
3. Decide on a customer value proposition (CVP) and a set of activity
choices to efficiently deliver it. The goal is to drive the largest
“wedge” between the buyers’ willingness to pay and the total cost
to produce.

Circle the Key Sub-Activities (italics) in SmartShoe

Firm Infrastructure – Select the product strategy (i.e., customer value


proposition), finance, accounting, legal and government affairs.
Human Resource Management – Hire, train, and reward employees.
Support Assign employees to positions in the firm.
Activities Technology Development – Improve assembly processes and/or develop
new products to sell.

Procurement – Decide how many and where to purchase the raw materials.

Inbound Operations Outbound Marketing After-sales


Logistics Logistics & Sales Service

Primary Receive Transform Fill orders and Price product Product


Activities and store raw materials deliver products and increase installation,
raw materials into quality, to customers customer warranty,
finished demand by parts and
products for promoting repairs
shipping the product
Source: Adapted from Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 2008).
Driver Activity Driver Questions & Decisions
Learning How long has the key activity been performed? Can you increase learning in a key activity?

Scale What is the size of the key activity? Increase the size advantages of an activity? Spread fixed costs
over larger activity volumes?
Capacity Utilization How much of the activity’s capacity is being used? Can you increase the capacity utilization of the
activity?
Linkages How is the activity aligned with other activities? Do you improve the coordination between activities or
make better trade-offs?
Integration Is the key activity done in-house or outsourced? Should you outsource an activity?

Policy Choices Choice of customers, promotions, assembly, etc.? Can you make tactical choices to increase
willingness to pay or reduce cost?
Inter-relationships Can you share activity costs with other business units? Share procurement, infrastructure, or HR costs
across business units?
Timing When was the key activity configured? Can you purchase assets earlier in the business cycle or build
the brand?
Location What is the physical location of the activity relative to the firm’s buyers and suppliers? Can you move
the activity closer to buyer/suppliers?
Institutional Factors What laws or regulations impact a key activity? Can we adjust the activity or lobby to change these?

Driver Activity Driver Decisions in the Sim


Learning Can you increase learning in a key activity?

Scale Can you increase the size advantage of an activity? Spread the fixed assembly line
costs over larger activity volumes?

Capacity Can you increase the capacity utilization of the activity?


Utilization

Linkages Can you improve the coordination between activities or make better trade-offs?

Integration Should you outsource an activity?

Policy Choices Can you make tactical choices that increase the buyers’ willingness to pay or reduce
cost?

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