Submitted To:Prof.Rutvi Sarang Submitted By:Dharmishtha Baria Roll.No.1.
Transcript of Submitted To:Prof.Rutvi Sarang Submitted By:Dharmishtha Baria Roll.No.1.
Submitted To:Prof.Rutvi SarangSubmitted By:Dharmishtha BariaRoll.No.1
Value chain AnalysisValue chain Analysis
Definition: Value chain- consists of the major activities that have been added to the product during its creation, development or sale.
A company’s value chain consists of a linked set of value-creating activities performed internally The value chain contains two types of activities
Primary activities – where most of the value for customers is created
Support activities – facilitate performance of the primary activities
Value chain AnalysisValue chain Analysis
Primary activities : the creation of product or service◦inbound logistics - order entry data
collection, obtain raw materials, subassemblies
◦Operations - order processing, MRP; transformation of inputs to finished goods
◦Outbound logistics - distribution & sales data; storing products,
◦Marketing sales - promotions, discounting; establishing a customer need
◦Service activities - calls, returns, product rotation and maintenance
Support activities: The required infrastructure◦Org's infrastructure◦Human resources◦Technology◦Procurement
ValueValueChains of Rivals DifferChains of Rivals Differ
Several factors can cause differences in value chains of rival companies
◦Internal operations
◦Strategy
◦Approaches used in execution of the strategy
◦Underlying economics of the activities
◦Differences complicate task of assessing rivals’ relative cost positions
The Value Chain SystemThe Value Chain Systemfor an Entire Industry for an Entire Industry Assessing a company’s cost
competitiveness involves comparing costs all along the industry’s value chain
Suppliers’ value chains are relevant because◦ Costs, performance features, and quality of inputs
provided by suppliers influence a firm’s own costsand product performance
Forward channel allies’ value chains are relevant because ◦ Costs and margins are part of price paid
by ultimate end-user◦ Activities performed affect end-user satisfaction
Representative Value Chain Representative Value Chain for an Entire Industry for an Entire Industry
Developing Data to Developing Data to Measure a Company’s Cost Measure a Company’s Cost Competitiveness Competitiveness
After identifying key value chain activities, the next step involves breaking down departmental cost accounting data into costs of performing specific activities
Appropriate degree of disaggregation depends on◦ Economics of activities◦ Value of comparing narrowly defined
versus broadly defined activitiesGuideline – Develop separate cost
estimates for activities◦ Having different economics◦ Representing a significant or growing proportion
of costs
Activity-Based Costing: A Activity-Based Costing: A KeyKeyTool in Analyzing CostsTool in Analyzing CostsDetermining whether a company’s
costs are in line with those of rivals requires◦Measuring how a company’s costs
compare with those of rivals activity-by-activity
Requires having accounting data to measure costof each value chain activity
Activity-based costing entails◦Defining expense categories according
to specific activities performed and◦Assigning costs to the activity
responsible for creating the cost
Benchmarking Costs ofBenchmarking Costs ofKey Value Chain ActivitiesKey Value Chain ActivitiesFocuses on cross-company
comparisons of how certain activities are performed and costs associated with these activities◦Purchase of materials◦Payment of suppliers◦Management of inventories◦Getting new products to market◦Performance of quality control◦Filling and shipping of customer orders ◦Training of employees◦Processing of payrolls
Objectives of Objectives of BenchmarkingBenchmarkingIdentify best practices in performing an
activity
Understand the best practices in performingan activity – learn what is the “best” wayto do a particular activity from thosedemonstrating they are “best-in-world”
Learn how other firms achieve lower costs
Take action to improve company’s cost competitiveness
What Determines if aWhat Determines if aCompany Is Cost Company Is Cost Competitive?Competitive?Cost competitiveness depends on
how well a company manages its value chain relative to how well competitors manage their value chains
When costs are out-of-line, high-cost activities can exist in any of three areas in the industry value chain 1. Suppliers’ activities 2. Company’s own internal activities 3. Forward channel activities
Options to CorrectOptions to CorrectInternal Cost Internal Cost DisadvantagesDisadvantages Implement use of best practices throughout
companyEliminate some cost-producing activities
altogether by revamping value chain systemRelocate high-cost activities to lower-cost
geographic areasSee if high-cost activities can be performed
cheaper by outside vendors/suppliers Invest in cost-saving technology Innovate around troublesome cost
componentsSimplify product designMake up difference by achieving savings in
backward or forward portions of value chain system
Translating Performance of Value Translating Performance of Value Chain Activities to Competitive Chain Activities to Competitive AdvantageAdvantageA company can create competitive
advantage by managing its value chain to
◦ Integrate knowledge and skills of employees in competitively valuable ways
◦Leverage economies of learning / experience
◦Coordinate related activities in ways that build valuable capabilities
◦Build dominating expertisein a value chain activity critical to customer satisfaction or market success
Translating Performance of Value Translating Performance of Value Chain Activities into Competitive Chain Activities into Competitive Advantage Advantage
Examples:Examples:Merck and Glaxo: world’s most
competitively capable Pharmaceutical companies.
Competitively crucial activities:extensive R&D to achieve first discovery of new drugs,carefully consructed approach to patenting,rapid and thorough clinicaly clearance through ragulatory Bodies,strong distribution and sales force.
FedEx
Value Chain Analysis is a useful way of thinking through the ways in which you deliver value to your customers, and reviewing all of the things you can do to maximize that value.
It takes place as a three stage process:Activity Analysis, where you identify the
activities that contribute to the delivery of your product or service.
Value Analysis, where you identify the things that your customers value in the way you conduct each activity, and then work out the changes that are needed.
Evaluation and Planning, where you decide what changes to make and plan how you will make them.
Example:Lakshmi is a software development manager for a software house. She and her team handle short software enhancements for many clients. As part of a team development day, she and her team use Value Chain Analysis to think about how they can deliver excellent service to their clients.
Activity Analysis: Order takingEnhancement specificationSchedulingSoftware developmentProgrammer testingSecondary testingDeliverySupport Lakshmi also identifies the following non-
client-facing activities as being important:Recruitment: Choosing people who will
work well with the teamTraining: Helping new team members
become effective as quickly as possible, and helping team members learn about new software, techniques and technologies as they are developed.
She focus on Order taking process to deliver more value to customers
She identify the following Value Factors:
Giving a quick answer to incoming phone calls;
Having a good knowledge of the customer's business, situation and system, so that they do not waste the customer's time with unnecessary explanation.
Asking all the right questions, and getting a full and accurate understanding of the customer's needs.
Explaining the development process to the customer and managing his or her expectations as to the likely timetable for delivery.
THANK YOU