Value Chain Analysis

A value chain refers to activities that a firm performs to create value for its customers. It assists organizations to evaluate and assess their activities and deduce the relationship among such activities. Given that the manner in which a business evaluates its activities and forms connections influences its profits and costs, value chain assists organizations to understand the source of value. This essay describes how managers can create value by forming critical relationships among primary and support activities within the value chain.

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Primary activities are directly related to the physical creation, sales, and service or product maintenance while support activities such as procurement and human resource management complement primary activities by playing various functions to support them (Autry, Goldsby, Bell, & Hill, 2013). Thus, managers should identify sub-activities under each primary activity that creates value for the organization. They should also establish sub-activities for each support activity and define specific ones that create value in each primary activity. Doing this will encompass identifying indirect, direct and quality assurance sub-activities that ultimately will have cross-functional responsibilities to various primary activities. Nonetheless, managers can only improve the competitive advantages of an organization by identifying and defining how these activities relate. Thus, they should conduct a comprehensive evaluation of all sub-activities and their relationships and establish ways of enhancing them to increase the values of the business.

By having a positive understanding between departments, it is possible for managers to develop quality products and lower production costs. For instance, in cases where human resource department practices inter-departmental transfers and moves workers from one branch to the other, the employee motivation is likely to increase. This will also improve the exchange of views and information across departments and divisions thus improving operations of the company.

Creating value by forming essential relations among primary and support activities in a value chain also requires extra efforts and time from managers to create positive relationships among suppliers and inbound logistics. Principally, a good relationship between suppliers and the logistic team often leads to the adoption of just in time management that undoubtedly decreases inventory costs and improve qualities of the product. Williamson, Cooke, Jenkins, and Moreton (2013) noted that when clients are allowed to relate with manufacturing company directly, they would have a sense of trust and become loyal buyers for the product. This in return will curb cases of bad-mouthing by the clients and consequently enhance goodwill among customers.

In conclusion, creating and maintaining relationships among value chain activities is essential within and outside the organization, as well as, its suppliers and customers. It also helps a business to understand its activities and establish appropriate changes to cost drivers and differentiation.

References

Autry, C. W., Goldsby, T. J., Bell, J. E., & Hill, A. V. (2013). Managing the global supply chain. Ney Jersey: FT Press.

Williamson, D., Cooke, P., Jenkins, W., & Moreton, K. M. (2013). Strategic management and business analysis. New York, N.Y.: Routledge.