DEEPTI SINGAL

GAURI CHOPRA
NEHA KUMAR

1
 Value
 The performance characteristics, features and
attributes, and any other aspects of goods and
services for which customers are willing to give
up resources (i.e., spend money).
 The Value Chain
 The entire series of organizational work
activities that add value at each step beginning
with the processing of raw materials and ending
with the finished product in the hands of end
users.
 PORTER’S Generic Value Chain
Support
activities

Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premises
Operations Transforming inputs into finished products.
Outbound logistics Storing and distributing products
Marketing and Sales Promotions and sales force
Service Service to maintain or enhance product value
Corporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QM
Human resources management Recruiting, hiring, training, and development
Technology Development Improving product and manufacturing process
Procurement Purchasing input
Value chain participants
 What is Value Chain Management?
 Theprocess of managing the entire sequence of
integrated activities and information about
product flows along the entire value chain.
 Goal of Value Chain Management
 Tocreate a value chain strategy that fully
integrates all members into a seamless chain
that meets and exceeds customers’ needs and
creates the highest value for the customer.
 Value chain model is a useful analysis tool for
defining firm’s competencies and the activities
in which it can pursue competitive advantage
as follows :

 LOWER COST ADVANTAGE- by better

understanding cost and squeezing them out of
the value- adding activities.

 DIFFERENTIATION – to focus on core

competencies activities in order to perform
better than competitors.
 A firm may create a cost advantage either by
reducing its cost or by reconfiguring the
value chain.

 Example : Maruti Udyog gained an entry

barrier arising from its relatively lower
initial investment cost in the small budget
car segment
 It can arise from any part of the value chain
as follows:
- unique procurement of inputs, not widely
available to competitors
-reconfiguration of value chain – forward
integration, in order to perform functions
that were once performed by customers and
backward integration in order to have more
control over its inputs.
For Example : Videocon having an integrated
manufacturing line for color television from
glass shells to picture tube to complete TV
sets.
 Example of Reconfiguring the Value Chain

Old Transport to Convert

Collect Export and
The plant to milk
Way: Milk sell
Near the town powder
From
villages
 Example of Reconfiguring the Value Chain

Feeder Balancing Dairy

New
New Collect milk Make powder in
Sell and export
the plant near
Way: village
Milk powder
directly
Save on shipping costs by 10 times
Utilize cheaper non-union rural labor
 For the value chain to achieve its goal of
meeting and exceeding customers needs and
desires, collaborative relationships among all
chain participants must exist.

 Each partner must identify things they may not

value but that customers do.

 Example: Kraft foods believes that better

communication with customers and suppliers
has facilitated timely delivery of goods and
services.
 Successful value chain management is not
possible without a significant investment in
Information Technology.

 Thus IT can be used to restructure the value

chain to better serve end users.
 Value chain management radically changes
organizational processes i.e. the way that
organizational work is done.

 When managers decide to manage operations

using value chain management, old processes
are no longer appropriate. (non-value added
activities should be eliminated)
 Successful value chain management is not
possible without strong and committed
leadership.
 Managers must support, facilitate and promote
the implementation and practice of value chain
management .
 Managers should clarify expectations regarding
each employees role in the value chain.
 Example : American standard – a plumbing
fixtures company identified clear requirements
for suppliers and were prepared to drop any that
could not meet them
 Without employees there would be no
products produced or services delivered .
 In fact there would be no organised efforts in
the pursuit of common goal.
 3 main human source requirements for value
chain are:
 Flexible to job design
 Effective hiring process
 Ongoing training
 The last requirement for value chain
management is having a supportive
organizational culture and attitudes.

 Attitudes encompass not only the internal

partners in the value chain but extend to
external partners as well.
 Improved
Improved Improved
Improved
Procurement
Procurement Logistics
Logistics

Benefits
Benefitsof
of
Value
ValueChange
Change
Management
Management

Enhanced
Enhanced Improved
Improved
Customer
CustomerOrder
Order Product
Product
Management
Management Development
Development
 Obstacles to Value Chain Management
 Organizational barriers
 Refusal or reluctance to share information
 Reluctance to shake up the status quo
 Security issues
 Cultural attitudes
 Lack of trust and too much trust
 Fear of loss of decision-making power
 Required capabilities
 Lacking or failing to develop the requisite value chain
management skills
 Obstacles to Value Chain Management
(cont’d)
 People

 Lacking commitment to do whatever it takes

 Refusing to be flexible in meeting the demands of a
changing situation
 Not being motivated to perform at a high level
 Lack of trained managers to lead value chain
initiatives
 Technology’s Role in Manufacturing
 Increasedautomation and integration of
production facilities with business systems to
control costs.
 Predictive maintenance, remote diagnostics, and
utility cost savings
 The Concept of Quality
 Theability of a product or service to reliably do
what it’s supposed to do and to satisfy customer
expectations.
 Mass Customization
 Isa design-to-order concept that provides
consumers with a product when, where, and how
they want it.
 Makes heavy use of technology (flexible
manufacturing techniques) and engages in a
continual dialogue with customers.
 Value chain model
Competencies
Differences between eBay and amazon.com
Implications
Issues to address
Further evaluation will include a closer look at
amazon.com’s value chain and differences compared to
eBay
 legal

finance M
A
Human resource R
G
Technical development(R+D) I
N
marketing Conversion Auction Payment Peer
from traffic to process
S
review
buyers and
sellers
 Differentiation from other service providers leads to
unique value creating activities for eBay
 legal
finance
M
A
Human resource R
G
Technical development(R+D) I
N
marketing Conversion Retail Cross Product S
from traffic process selling review
to buyers
and sellers
Differentiation from other services providers leads to unique value creating
activities for amazon.com
Competencies -technical proficiency - technical proficiency
-usability -usability
-shipping

Core competencies -bidding site -catalogue site

-conversion rate -product review
(traffic to subscribers) -conversion rate
Distinctive -peer review -cross -selling
competencies

Both eBay and amazon.com,have distinctive competencies that differentiate

them from competition and from another.
 eBay started with used  amazon.com started with new
products and is now expanding
products and is now
to new ones
distributing used products as
 Community focus-connects well.
people  Product focus
 “virtual “product- no  Handles physical product and
ownership or handling of
takes ownership
physical ones.
 Warehouse, packaging and
 Facilitates transactions.
delivery.

The main difference between the two companies is the handling of virtual and physical products.
 Present Near Future
 Positioning
 Too many sellers in comparison
to no. of buyers.
 Prioritization of efforts
 Security(of the auction process
 Change in the no. of categories
and payment)  Specialization
 Fraud(through users in the in
Present  Expansion in terms of different
the auction process and in the types of sellers
review process)  Fixed price auctions
 Necessity to accommodate
Power sellers (businesses)

Apart from system related issues the integration of sellers is the most urgent issue for eBay