Research Topics: Value Chain Analysis Of Production

Sample Essay the Model Presented Below in Extract Value Chain Analysis of Production Model

The model presented below is an extract of the Value Chain Analysis of Production Model of M.E. Porter to present the areas in the model that appropriately apply to e-customization. However, the general salient point of the model is still captured in this presentation particularly the interplay of primary and support activities in adding value to the each level of production and delivery of product resulting to competitive advantage of the firm. Value chain analysis espouses by M.E. Porter in his book, Competitive Advantage (1980) discusses activities that added value to every steps of delivery of the products starting from input planning, manufacturing, dispatching of products, marketing and sales and even after sales service. These activities are carried out hand in hand with support activities such as infrastructure and technology which is important in e-customization.  Infrastructures within the organization such as finance and planning are important to design and support the development and maintenance of technology needed to actualize e-customization service.   Customers participate in the value chain of garments retailers in e-customization by participating in providing inputs in the design of garments they want to purchase and directing how it should be manufactured based on the specifications they provide using technology that allows them to participate in this process. This contribute immensely to customer satisfaction since customer themselves are deciding what they want to be done to the product they are purchasing which is basically involves the approaches to customization. Credit:ivythesis.typepad.com

Sample Essay the Model Presented Below in Extract Value Chain Analysis of Production Model

The model presented below is an extract of the Value Chain Analysis of Production Model of M.E. Porter to present the areas in the model ...

PROCUREMENT FUNCTION

PROCUREMENT FUNCTION: AN EXAMINATION OF ITS VALUE ADDED ELEMENTS The procurement philosophy of every organization must be to obtain the most suitable goods and services at the most reasonable contract prices, delivered when and where required ( , 1991). This maximization of the company’s resources in terms of the acquisition of materials for manufacture, production and firm use is in a continuous process of development, as more cost-effective and efficient ways are being introduced in the field of procurement. The purchasing function has received considerable attention in the past decade as firms are constantly finding ways to increase the effectiveness and the efficiency of the task of acquisition, particularly in its people, processes, technologies and the framework under which they are governed and measured ( 2006). This could lead to an overall increase in the business’ profit, as cheaper prices, less wastage in materials and fewer delays in the production of goods and/or provision of services are products of careful purchasing. There are four main recipients of value added by the purchasing department, according to  (1999): the organization, the employees, the consumers and the suppliers.  “The perception of “value added” is critical to every function/department in any organization in today’s business environment. Unless there is a clear understanding at the senior management levels that purchasing does contribute at a significantly higher level of adding value, then purchasing people probably will continue to be considered simply as “order placers.” It matters less what any person or group in purchasing thinks about their ability to contribute; what matter more is senior management’s perception of the purchasing department’s actual contribution” ( 1993). With the increased focus on finding ways to economize on purchasing costs, the procurement function has been elevated to a strategic component of creating value.  (n.d.) stated that apart from salaries, the biggest area of expense for most businesses is purchasing. He said that a sharpened focus on buying can reduce a business’ costs by as much as 20%. Thus, apart from the sales department, he argues that no other area of the business could potentially have so much impact on the bottom line. “The modern procurement organization is typically focused on delivering eight or nine key processes. These range from managing the transactional activities such as raising purchase orders and paying suppliers to the strategic activity of selecting new suppliers and managing relationships with the existing supply base. It is the strategic and tactical procurement processes that deliver the big improvements that companies are seeking from their procurement functions (for example, reduction in cost of goods sold, improvement in service levels)“, explain  (2006). In the value chain analysis developed by (1985), procurement is viewed as a support activity that contributes to the competitive advantage of a business unit by adding value.  The purchasing function uses various inputs to perform value-adding processes (market and value analyses, sourcing, negotiation, etc) and to provide output like quality, services, materials, etc. If purchasing performs these activities effectively, this output provides the organization with a competitive advantage (see figure1). The value-chain demonstrates that the purchasing function has a major role in adding value to the organization” ( 2001). PURCHASING ACTIVITIES             “For many buyers, their new acceptance of value added is closely connected to outsourcing and the need to use the resources of suppliers to conserve their own companies’ limited resources. Typical of purchasing professionals holding that view is , program manager, outsourcing, at Genus Inc.’s Ion Technology Div. in Newburyport, Mass. She notes that her company’s deep emphasis on adding value through outsourcing was driven by a desire to maximize use of the company’s resources. By putting as much of manufacturing in the hands of suppliers, Genus is able to deploy a greater percentage of its resources behind its core competency–product development and testing ( 1995).  The main value added by purchasing, according to  (2001) is assuring the continuity of supply in the organization. The illustration of the purchasing process[1] , demonstrates the flow of action that happens within the purchasing department. The diagram is used for purchasing transactions outside of the firm, as in-house transactions require simpler and faster operations (the requisitioning activity will touch on the subject briefly).  Each process will be discussed in detail including the value added elements that go with it. Requisitioning             A requisition form always initiates the process of purchasing. The importance of requisition is often overlooked by many organizations but this initial procedure provides the purchasing officer with all the essential information that he or she needs in the actual purchase of materials. The in-house form (which means that it is for use within the firm only) usually contains these following items: (1) date of request; (2) name and department of the person requesting for the material; (3) particulars of the item/items requested i.e., product code, brand or make, etc. (4) unit and quantity of item/items desired; (5) date needed; (6) date of last request; (7) signature of the person requesting and (8) approval signature of purchasing officer. The form is then forwarded to the purchasing officer. As in the case of outsourcing materials, the purchasing officer will be the one responsible for filling up a form (this time to be sent to the supplier), with basically the same items as that of the in-house form but with additional particulars as the name of the supplier/suppliers, unit price of the item/items, when and where to deliver, a purchasing order (PO) number for the reference of the supplier, and an approval signature from the financial department.             Purchasing could do away with a lot of paper work and contribute to value adding by making sure that the requisition forms that they issue to the supplier are organized and easy to read. Searle’s[2] purchasing department does this by being very specific about the quantity that they order and by using forms that are consistent and easy for the suppliers to read. They have also made it easier for the employees to request for items by providing a requisitioner’s handbook, a step-by-step guide to filling out forms, company procedures and contact persons ( 1990). Financial Approval             This involves the authorization to go ahead with the purchasing commitment. This will be made easier by the allotment of a space for such purposes in the requisition form. The persons usually affixing their signature for approval are the finance or the budget department heads. This process could be made easier if there is a batch grouping for requisitions. Taking of immediate action in signing the forms contributes to the speed with which the production (if the request is for raw materials or manufacturing services) and the employees (if the request is for office use) perform their respective functions in the firm’s structure. Market Assessment Once the purchasing officer receives the approved requisition form, an appraisal of the market should be done, with these following considerations in mind: (1) Is there a competitive market for the item? ; (2) Is the volume/value of goods required sufficient to warrant calling for quotations and tenders, and if so, should prices and other details be obtained by telephone or in writing?; (3) If there is no competitive market, should the sole supplier be given an immediate order, or can a lower price be negotiated?; (4) Is it appropriate to call for “Registration of Interest”, prior to inviting formal tenders?; (5) Are suitable period contracts available?; (6) Is there a list of “approved suppliers” for the item, or is the establishment of an “approved suppliers” list warranted?; (7) Could there be scope for a bulk purchase? ( 1991) After having attended to such considerations, the purchasing officer could then proceed to making the purchase decision. Only through considering the items enumerated above could this process contribute to value adding. An excellent market assessment could prevent materials wastage, further delay of delivery and more strategic supplier selection. Purchase Decision             The purchasing officer needs to determine the purchasing method he or she will use in acquisition. The principal methods of making a purchase are as follows: (1) tendering; (2) selective purchase; (3) emergency purchasing; (4) bulk purchasing; (5) period contracts and (6) indent purchasing. Sometimes, the purchasing officer has not decided yet on whom to buy from. Decisions can be made through bidding or asking for price quotes from a range of possible suppliers. This process must be recorded or documented for purposes of auditing and to justify the reasons for having chosen such and such supplier in case of subsequent problems. After having picked the purchasing method and the supplier suited to the firm’s standards, the officer could proceed to the rest of the acquisition process.             Value added in the purchasing decisions comes in the strategic supplier selection. Being overly dependent on only a few suppliers could prove disadvantageous to the company. If these supplier potions fail to deliver, there will be delay in the production process, and delay means additional expense on the firm’s part. Value added can also be seen in the delivery method the business chooses. Choosing the delivery method which will best preserve the original state of the items ordered will ensure that materials used in production is in top condition, which in turn would produce top quality goods or services. Ordering The officer in charge of buying materials will then arrange to order from the supplier. This should be documented, as this will form an agreement between two parties: the buyer (the organization), and the seller (the supplier). The order contract should expressly reflect the transactions to be made, like the method of delivery and the terms of payment. All the legal and other significant details should appear in the documentation. This, then, should be forwarded to the supplier. The firm should also establish a formal order-tracking system to ensure the follow-up of orders. The system should include: (1) checking with suppliers that delivery dates are still able to be met. If timing is critical, frequent pre-delivery checks may be necessary; (2) documentation which acknowledges part-delivery of orders and allows follow-up on delivery of the remainder; (3) a procedure which ensures that suppliers are paid in accordance with contracted terms. (This double-check will help to maintain good supplier/purchaser relations); (4) a record of supplier performance (1991). In ordering, the purchasing department could add to value by making sure that correct specifications are indicated in the order contract which will prevent incorrect delivery. The following-up of orders could also add value by ensuring that the lead time is used effectively. Processes in production which could be done without the ordered goods or services should be done while waiting for the delivery to arrive. As such, time is maximized. Delivery             The most important part of the purchasing process is the actual delivery of the goods or services ordered. Delivery forms a large part of the acquisition function, and a number of ways can be done to ensure that the form of delivery is economical. The decisions on how to deliver may be in the discretion of the buyer or the supplier, depending on the agreement. But most companies determine the method of delivery, as by doing this they could control and reduce the delivery costs, which forms part of the value added that the purchasing department contributes to the organization. Receipting and Accounting for Goods/Services Delivered             The purchasing process does not end in the delivery of the goods or service. The receiving officer of the firm should make sure that the proper quality and quantity of items is delivered and if it was delivered on time. This check could be done by comparison of the actual delivery as against the items in the purchase order (the original form is usually in the custody of the supplier). Sometimes, a pre-delivery check is done by the firm as extra precaution against damaged or substandard goods or services being delivered. The copy of the purchasing order in the hands of the receiving officer will serve as the receipt to initiate accounting actions there from.             Value added in this case could appear at the more efficient way of checking the delivery as against the PO. The receiving section should have a system for checking the delivery in the fastest way possible. If there were inconsistencies in the delivered goods and/or services, for example the quantity in the PO did not tally with the delivery or a different make or brand has been delivered, the supplier could be readily notified of such occurrence. As such, the supplier will have to take immediate action so as not to further delay the production process that relies on purchasing for its materials. Payment             Terms of payment that appeared in the order contract should be followed by both the parties. If they agreed on a cash-on-delivery (COD) term, the firm should make the corresponding payments upon determination that the goods or services delivered are satisfactory to the standards of the company.             Value added in this stage of purchasing includes potential areas for payment negotiation such as discounts, progress payments and postponement of payment during warranty period or until satisfactory performance is demonstrated. Ensuring that the company gets all the possible reduction in costs is an important element of the payment process. Accounting System             This requires coordination between the purchasing and the accounting departments of the organization. The purchasing department should provide the accounting department with the necessary details that the latter needs for input in the books of the company. Careful transaction entries must be ensured, costs and charges must be properly documented, as these records will be useful for future reference of the company and for taxation purposes.             Value added in this last process of acquisition is, as stated above, proper bookkeeping of purchase records as this will make an excellent reference for future transactions. If, for example, a supplier was able to deliver goods in the exact conditions provided by the company, the accounting department can retrieve records of the transaction with the supplier for proof that the firm could well do business with that supplier again. In legal cases, these records could also save the organization in a way that there is proof that such and such transactions existed and that they abided by the rules of law. CONCLUSION             How these value added elements measure up to the standards of the activities of the procurement process depends on the execution of such activities. Close coordination with all the company’s departments, especially the accounting office, the supplies and the receiving sections, is the key to attaining the true meaning of value added activities. In the end, everyone profits from this. The organization, because it has gained income and saved a lot on costs; the employees, because they were able to get on with their tasks due to prompt action for their requisitions; the suppliers, because they were able to establish a good relationship with the firm; and finally, the consumers, because they were able to get the company’s products and services with added value.   REFERENCE   Credit:ivythesis.typepad.com

PROCUREMENT FUNCTION

PROCUREMENT FUNCTION: AN EXAMINATION OF ITS VALUE ADDED ELEMENTS The procurement philosophy of every organization must be to obtain the ...

Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three supermarket chains (Woolworths, Coles and Aldi)

Value Chain Analysis according to (2006) is a systematic approach in scrutinizing the development of competitiveness in the company. The chain consists of series of different activities:   Primary Activities:   Inbound Logistics. The company receives goods from the suppliers. Goods are usually stored until they are needed.             Operations.This is where the products are manufactured and in the case of the supermarket arranged. In the supermarket it includes packing of foods, beverages, etc.   Outbound Logistics.The goods are finished and must be sent to retailers or consumers.   Marketing and Sales. In these stage the company offers the consumers its specific needs. This area focuses more on communication with the consumers and promotions of the product.   Service. In Service it includes installation of products, services after the product is sold, and complaints of the consumers. Support Activities:   Procurement. This area is where the company purchases the goods and services. Procurement’s goal is to find the lowest price possible of a product in the highest quality.   Technology Development. Technology is a very relevant source of competitiveness in the company. It includes internet marketing and upgrading the systems of the company.   Human Resource Management (HRM). Employees of the company plays an important role in the progress of the company. The company must recruit, manage and train these personnel.   Firm Infrastructure. This activity is driven by corporate and strategic planning. It includes mechanisms for the control in the accounting department.     The  Centre for Retail Studies (2004), discusses that over the past years the shopping and grocery habits of Australians have altered. The factors that contribute to these changes are: population changes, size of households, new retailing practices and changes in lifestyle. Nowadays Australian consumers are more health-conscious The Australian supermarkets saw this trend on consumers, the companies promoted healthy nutritious foods by expanding the fresh and health sections in different supermarkets. Shopping habits of Australian consumers changed dramatically in just a span of four years, a number of consumers. According to Service Audits and Market Research in 2002 about 62% of Australian consumers do quick short trips to the supermarket more often, they spent less than one hour shopping while back in 1998 there were only 28%. Australian supermarkets created new formats in order to provide the customers convenience, speed and freshness. Only wet markets provide consumers with fresh products; nowadays grocery stores have food stores in shopping centres, shopping strips, neighborhood centres and convenience stores.                 The three biggest supermarkets in Australia are Woolworths, Coles Myer and Aldi. Woolworths is the largest supermarket chain in Australia according to  (2006) it is the largest food retailer in Australia and New Zealand, largest takeaway liquor retailer, and the largest Hotel and Poker Machine operator in Australia.             Woolworths are divided into different sections. The Non-trade, Service, Service Deli, Seafood, Bakery, Proprietary Bakery, Meat, Produce, Perishables, Long Life, Long Life Variety, Long life Night fill, Liquor and Fuel. Value chain analysis is important because these products and services must be in excellent quality because these are the basic needs of consumers. By using Value Chain Analysis, the company can identify and separate good procurement from bad ones, and the excellent ones are assembled in the shelf of the groceries.  (1990) discussed that the Woolworth’s Management Philosophy is always applied in its daily operations. The approach of managers is to try new ideas and test it if it will be productive or not.  Woolworth also emphasizes human as one of the factors. Woolworth is a company committed in having and giving excellent performance.   Coles is the second largest supermarket in Australia according to (2006) it is founded in 1914 and was called “Coles Variety Store.” Coles has the following departments; Bake house, Dairy, Delicatessen, Fresh Produce, Grocery, Meat, Service, Liquor, General Merchandise and apparel and Overhead. The implications of using the Value Chain Analysis in Coles is the company become more competitive just like when it merged with the oil company shell to produce cheap gas. It paved way for other companies such as Woolworths to have also a deal with another oil company thus making the market more competitive. The  Centre for Retail studies (2004) also added that by using the Value Chain Analysis Coles Myer came up with ideas for low-pricing strategy not similar with the ones from Woolsworth.             According to (2006) Aldi is an international discount supermarket chain. It is based in Germany and is divided to Aldi Nord and Aldi Sud. Aldi speciales in items that are often used by the consumers like food and beverages. Aldi has its own products and gives limited shelf to outside brands. The impact of using Value Chain Analysis by  is that it provides more cheaper products to the consumers. In the past months, according to the Centre for Retail Studies,(2006) the cheaper products that Aldi gave the consumers impacted both the two biggest supermarkets in Australia, the Coles Myer and Woolworths. The companies came up with different strategies like Everyday low pricing (EDLP) and Save Everyday strategies. Value chain analysis is a tool that helps companies to be more competitive, deliver good products and services at the excellent quality in a cheaper price.                       Credit:ivythesis.typepad.com

Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three supermarket chains (Woolworths, Coles and Aldi)

Value Chain Analysis according to (2006) is a systematic approach in scrutinizing the development of competitiveness in the company. The ...

â€œUNDERTAKE A FULL VALUE CHAIN (COMPLEMENTORS) ANALYSIS OF THE AUSTRALIAN SUPERMARKET INDUSTRY AND ITS IMPLICATIONS ON EACH OF THE 3 SUPERMARKET CHAINS (WOOLWORTHS, COLES AND ALDI). SUPPORT WITH EVIDENCE.â€

Assignment 1 Grading Sheet                                                                                     Total of 20% of marks, Individual   1250 word assignment plus presentation. Each member of the group MUST speak to get their individual presentation mark of UP to 5%. Balance of mark 15% on report handed in. While the presentation is by the group, the mark is for the individual’s presentation performance plus assignment. This presentation should take 20 minutes for the group.     Presentation Assessment rationale Presentation: fluency, preparation, quality of answers to questions   Maximum of 5% 5 marks – fluent, interesting presentation, excellent knowledge of topic in questions, well prepared, succinct, answers topic. 4 marks – fluency, some effort in presentation, knowledge of topic in questions, some preparation, addresses topic. 3 marks – lacking confidence or lacking fluency or interest to presentation, some knowledge of topic perhaps some gaps. Evidence of some preparation but could offer better preparation, topic covered. 2 marks – lacking confidence, fluency, interest in presentation. Medium to poor coverage of topic, presentation, or knowledge with gaps. 1 mark – little attempt at presentation and preparation, gaps of knowledge, poor analysis of topic, poor understanding of topic. Written report Assessment rationale Understanding of issues, relevance to Topic.  Evidence supporting arguments   Maximum of 5% 5 marks – highly relevant, good relevance to theory with clear theoretic arguments, highly effective identification of key points effectively explained. Excellent use of evidence to support arguments. 4 marks – relevant, some linking with theory and theoretical arguments, effective presentation and identification of key points. Clear explanations.  Some evidence to support arguments with a range of resources and references. 3 marks – some relevance, some theory, some points missed but major points identified, some explanation however could offer more. Generally uses some evidence. 2 marks or less – lacking relevance with poor understanding of issues, lacks theoretical base or analysis, explanations unclear or irrelevant.  Little supporting evidence to justify arguments. Insights, critical analysis   Maximum of 5% 5 marks – Very highly insightful where analysis has uncovered not just obvious points but more demanding analysis. Reasoning explained. 4 marks – High insights where analysis probes not just obvious points, some elements missed or could be more effectively explained. Reasoning generally explained. 3 marks – Some insights, tends to be more obvious points. Some attempts at explanation but some elements could be more clearly identified. Reasoning for some elements explained. 2 marks or less – Insights are faulty, poorly explained, lack substance. Poor explanations or few explanations for reasoning. Spelling, grammar, referencing through assignment, quality of referenced sources.   Maximum of 5% 5 marks – no errors or very minor spelling, punctuation or grammatical errors. Very extensive research and referencing, clearly written, within word limits. Very high level of presentation. 4 marks – Minor errors. Some extensive research and generally good referencing, a little over or under word limits. Good presentation. 3 marks – errors of spelling and punctuation, could improve writing quality. May be outside word limits. Some referencing missed or could offer more extensive research. Adequate presentation. 2 marks or less – bare minimum or lacking in research, poor referencing, numerous spelling, grammatical and punctuation errors, poor presentation.                                                                                           Assignment one Topics   Total of 20% of marks, individual     Assignment one topics.             Each group will study the same companies; however, each group will address DIFFERENT ASPECTS of each company as outlined by the weeks.   Companies for study are Woolworth’s, Coles, and Aldi. Students should focus on B2C market rather than B2B.     Week 8. (Two separate groups to present) Topic A: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> <li class="MsoNormal" style="text-autospace: none"> “Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three supermarket chains (Woolworths, Coles and Aldi). Support with evidence.” </li> </ul>     strategy – value chain analysis Introduction Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings: (1) Primary Activities – those that are directly concerned with creating and delivering a product (e.g. component assembly); and (2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others (“out sourced”). Linking Value Chain Analysis to Competitive Advantage What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used. Primary Activities Primary value chain activities include: Primary Activity Description Inbound logistics All those activities concerned with receiving and storing externally sourced materials Operations The manufacture of products and services – the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products) Outbound logistics All those activities associated with getting finished goods and services to buyers Marketing and sales Essentially an information activity – informing buyers and consumers about products and services (benefits, use, price etc.) Service All those activities associated with maintaining product performance after the product has been sold     Support Activities Support activities include: Secondary Activity Description Procurement This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers) Human Resource Management Those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business Technology Development Activities concerned with managing information processing and the development and protection of “knowledge” in a business Infrastructure Concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management   Steps in Value Chain Analysis Value chain analysis can be broken down into a three sequential steps: (1) Break down a market/organisation into its key activities under each of the major headings in the model; (2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage; (3) Determine strategies built around focusing on activities where competitive advantage can be sustained   Credit:ivythesis.typepad.com

â€œUNDERTAKE A FULL VALUE CHAIN (COMPLEMENTORS) ANALYSIS OF THE AUSTRALIAN SUPERMARKET INDUSTRY AND ITS IMPLICATIONS ON EACH OF THE 3 SUPERMARKET CHAINS (WOOLWORTHS, COLES AND ALDI). SUPPORT WITH EVIDENCE.â€

Assignment 1 Grading Sheet Total of 20% of marks, ...

VALUE CHAIN

VALUE-CHAIN   (DELL COMPUTERS INC.)     Introduction to Value-Chain             The Value-Chain was conceptualized and popularized by Michael Porter in 1985 through his book, a best-seller, Competitive Advantage: Creating and Sustaining Superior Performance. The main thrust of “the value-chain” is to categorize the generic “value-adding activities” of an organization. The value-chain management tool recognizes two value-adding activities in an organization, the “primary activity” and the “support activity”. The primary activities includes the following, inbound logistics, production, outbound logistics, sales and marketing, and maintenance. Support activities include administrative infrastructure management, human resources management, research and development team and procurement (, 2003, ). According to  (1985) a firm’s value chain is embedded in a larger stream of activities that he termed the value system. Suppliers have value chains (upstream value) that create and deliver the purchased inputs used in a firm’s chain. Suppliers not only deliver a product but also can influence a firm’s performance in many other ways. In addition, many products pass through the value chains of channels (channels value) on their way to the buyer. Channels perform additional activities that affect the buyer, as well as influence the firm’s own activities. A firm’s product eventually becomes part of the buyer’s value chain. The ultimate basis for differentiation is a firm and its product’s role in the buyer’s value chain, which determines buyer’s needs. Gaining and sustaining competitive advantage depends on understanding not only a firm’s value chain but how the firm fits in the overall value system (, 2003, ). Simply, the value chain is a model that describes a series of value-adding activities connecting a company’s supply side (raw materials, inbound logistics, and production processes) with its demand side (outbound logistics, marketing, and sales). By analyzing the stages of a value chain, managers have been able to redesign their internal and external processes to improve efficiency and effectiveness (, 1996, ).         Porter’s Generic Value Chain             The paramount aim of every organization is to achieve optimization of each element of the value chain. In analyzing various elements, for example, inbound logistics (material handling, inspection, just-in-time delivery), outbound logistics (order processes, transport), marketing and sales (product development, pricing, promotion, distribution), service (on-site and off-site service, spare parts, customer care), organizations ought to gain insight not only into their own potentialities but also of their competitors’ capabilities and competencies. The costs and value drivers of an organization are distinguished for each value activity. The value chain framework quickly made its way to the cutting edge of management zeitgeist as a powerful analysis tool for strategic planning. Its ultimate goal is to maximize value creation while minimizing costs. The Primary Value-Chain Activities <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Inbound logistics: the receiving and warehousing of raw materials, and theirs distribution to manufacturing as they are required. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Operations: the processes of transforming inputs into finished products and services. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Outbound logistics: the warehousing and distribution of finished products. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Marketing and sales: the identification of customer needs and the generation of sales. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Service: the support of customers after the products and services are sold to them. </li> </ul> These primary activities are supported by: <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The infrastructure of the firm: organizational structure, corporate culture, control systems, etc. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Human resource management: employee recruiting, hiring, training, development and compensation. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Technology and development: technologies that can support value-creating activities. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Procurement: purchasing inputs such as materials, supplies and equipments. </li> </ul>   Value Chains Generic Strategies               The firms profit potential depends on its effectiveness in performing these activities efficiently. By doing so, the amount that the customer is willing to pay for the product exceeds the cost of the activities in the value chain. It is through this activity that the firm can gain the opportunity to generate superior value. A competitive advantage can then be achieved by reconfiguring the value chain to provide lower cost or better differentiation. The value-chain model is a useful analysis tool for defining a firm’s core competencies and the activities in which it can pursue a competitive advantage. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Cost Leadership </li> </ul> An organization always aims to be the low-cost producer in its industry. If an organization can attain and maintain overall cost leadership then it will reach superior performance. Cost leadership can be obtained by focusing on key accounts, reaping economies of scale, controlling costs. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal"> A differentiation strategy </li> </ul> This strategy would demand an organization in offering something unique to its target customers. The uniqueness can be concerned to products, the way it delivers its goods and services, the way it markets its products or anything that shapes a customer’s perception in relation to differentiation. This could be the way products and services are branded or designed and the customers perceive such offerings as unique. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal"> Focus strategy </li> </ul> This strategy involves an organization being selective in terms of the segments it wants to serve and focusing on these segments to the exclusion of other segments. The focus strategy can either be cost focus or differentiation focus. If an organization does not choose generic strategies it wants to focus on then, it will be bewildered and far from its goals. The degree to which a generic strategy can be sustainable will reckon on competitors’ behavior and action. The organization constantly has to be a step ahead of its competitors. Generic strategies affect the following elements of marketing namely (1) costs and pricing, (2) product design, (3) marketing mix, (4) channels of distributions, (5) promotion, (6) segmentation, (7) branding, (8) marketing information, (9) marketing communication and lastly (10) profitability. Cost Leadership and the Value-Chain A firm may create a cost advantage either by reducing the cost of the individual value chain of activities or as what have been said before reconfiguring the value chain to suit lower production costs. Once the value chain is defined, a cost analysis can be performed by assigning costs to the value chain activities. The costs obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activity. In this way cost leadership is achieved by the firm in the Industry it is operating. Cost leadership would then affect cost and pricing of the firms’ product and the more logical strategy that the firm would employ is to lower its product price due to lower cost of production. By doing so, they are gaining comparative advantage with its competitor. Reconfiguration of the value chain also means an innovative structural change with in the organization like for example a new distribution channel, or a different marketing and sales approach. Differentiation Strategy and the Value-Chain             A differentiation advantage can arise from any part of the value chain. A procurement of technology, information, marketing strategy or input that are unique and not widely available to competitors create differentiation. The concept of differentiation stems from uniqueness or brand recognition. This advantage may be achieved either by changing individual value chain activities to increase uniqueness in the final product. Important factors are identified that leads to differentiation advantage. Policies and decisions of the organization is one. Learning curve or mastery of the employees in creating quality products is also one (, 1985). There are several ways in which a firm can reconfigure its value chain in order to take advantage of differentiation strategy, Dell for example implemented new distribution channels or strategy to be unique. Technology and the Value-Chain Technology also plays a vital role for the firm to gain competitive advantage over its competitor in the industry.  Almost if not all modern firms employ technology in all its value creating activity. Technologies have a very significant role in the organization, changes in technology can impact competitive advantage by incrementally changing the activities themselves or by making new possible configurations in the value chain. There are various types of technologies used in both primary activities and support activities. There is the inbound logistic technology which involves transportation, handling, storage communications etc. Technologies that are used in the production of the products and services are labeled as operations technologies. Production process, materials, machine tools used, packaging and maintenance are examples of production stages that employ technology. If there is an inbound logistics technology, there is also an outbound logistics technology. Outbound logistics refer to as the delivering of the product from the production area to the market or to the buyer itself. Outbound logistics employ almost the same technology used by the inbound logistics, it also requires transportation technologies, the handling, packaging, communication and information systems. Marketing the product and selling it to the market also requires technology through the use of media and information systems. The role of the firm usually do not stop after a consumer purchased a firm’s product, after-purchase services are important and product innovation is a constant process if the firm is aiming to stay at a competitive advantage from its competitors. After-purchase services and product innovation also requires the use of technologies. Because of technologies, innovation and creation of new products to suit customer satisfaction are made faster. We can note that technology is widely used across the value chain, and to the extent that technology affects uniqueness of the product, and this leads to competitive advantage.   The DELL Computers and its Value-Chain               As of July 2002, Dell Computer Corporation (Dell) was the world’s largest direct selling computer company, with 34,800 employees in more than 30 countries and customers in more than 170 countries. Headquartered in Austin, Texas, Dell had gained a reputation as one of the world’s most preferred computer systems companies and a premier provider of products and services that customers worldwide needed to build their information-technology and Internet infrastructures. Dell’s climb to market leadership was the result of a persistent focus on delivering the best possible customer experience. Direct selling, from manufacturer to consumer, was a key component of its strategy (, 2002, ). The company was based on a simple concept: that Dell could best understand consumer needs and efficiently provide the most effective computing solutions to meet those needs by selling computer systems directly to customers. This direct business model eliminated retailers, who added unnecessary time and cost, and also allowed the company to build every system to order, offering customers powerful, richly configured systems at competitive prices. Dell introduced the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory an average of every four days. In less than two decades, Dell became the number-one retailer of personal computers, outselling IBM, Hewlett-Packard, and Compaq ( , 2002,). The traditional value chain in the personal computer industry was characterized as “build-to-stock.” Computer manufacturers, such as IBM, Compaq, and Hewlett-Packard, designed and built their products with preconfigured options based on market forecasts. Products were first stored in company warehouses and later dispatched to resellers, retailers, and other intermediaries who typically added a 20–30 percent markup before selling to their customers (, 1999). Computer manufacturers commanded the upstream part of the value chain, while giving the downstream part to middlemen (resellers, retailers and other intermediaries). Retailers justified their profit margins by reasons that they also give free several benefits to customers: easily accessed locations selection across multiple brands, opportunity to see and test products before purchasing, and knowledgeable salespeople who could educate customers about their choices. The 1980’s saw two trends that allowed Michael Dell, of Dell Computers to radically engineer the personal computer industry value chain. First, it was the decade that corporate consumers were becoming increasingly sophisticated and advanced therefore did not require intense personal selling by salespeople. Its individual consumers, especially those buying their second or third computers had also become knowledgeable, computer savvy and experienced technology users. Second, different components or parts of the personal computer like the monitor, keyboard, memory, disk drive, software, and so on become standard modules. This standardization of basic parts of personal computers permitted the mass customization in personal computer system configuration (, 1998). Part of Dell Computer’s strength in its company’s SWOT analysis is its unique direct to customer model.  The creation of the model was the major reconfiguration of the traditional personal computer value chain, which computer manufacturers and Dell competitor are using. By employing the model, the company outsourced all components but it still performed the assembly. In the process this eliminated retailers and directly shipped the computers from its factories to end customers. This action leads Dell into Cost leadership among the players in the industry. By eliminating the retailers, consumers were buying consumers from Dell with out the extra payment for retailers’ margin. This in turn leads to cheaper computers from Dell compared to its competitors. As the Internet is becoming more integrated into daily life, businesses rely on the Internet for commerce and real-time information exchange; customers go online to shop, bank and conduct personal correspondence. Because of this Dell began to take customized orders for hardware and software over the phone or via the Internet. And it designed an integrated supply chain linking Dell’s suppliers very closely to its assembly factories and order-intake system. With the industry’s most efficient procurement, manufacturing and distribution process, Dell offers its customers powerful, richly configured systems at competitive prices. Every Dell system is built to order. Customers are getting exactly what they want. Dell uses knowledge gained from direct customer contact before and after the sale to provide award-winning reliability and tailored customer service.             By reconfiguring the traditional “build-to stock” value chain model of computer manufacturers, Dell Computers defined its biggest core competency and the activity in which it can pursue its competitive advantage. First Dell gained cost advantage from its competitors by understanding cost drivers (retailers) in its production and squeezing them out. The implementation of the direct to consumer model solved the problem of expensive computer born out of the margins asked by the middlemen. Dell Computers also realized the differentiation advantage by focusing on their efficient model as its core competency which resulted to Dell outperforming its competitors.             Another part of Dell’s strength in its SWOT analysis is its better access to technology compared to its competitors. Dell introduces the latest relevant technology much more quickly than companies with slow-moving indirect distribution channels. Currently Dell’s initiatives include moving even greater volumes of product sales, service and support to the Internet; using the Internet to improve the efficiency of Dell’s procurement, manufacturing and distribution process and further expanding an already broad range of value-added services. By taking its direct business model and its associated customer experience to even higher levels, through the Internet. Dell’s Management Systems             In August 1993, Dell engaged Bain & Company, Inc., a global business consultancy, to help it develop a set of metrics to judge business-unit performance. Thinking over on that experience, Michael Dell said in an interview with (1998), “It was all about assigning responsibility and accountability to the managers”. Michael Dell wanted the use of data and facts to be incorporated as the cornerstone in every Dell’s manager’s daily decision making. There were some managers who actually resisted the new management style of Michael Dell and some did eventually left. But for the most part of the organization, people were energized by the change. Michael Dell carefully communicated this management move as to what this meant to the future of Dell Computers employee, to the consumers and to its shareholders. It was received by an overwhelming response, “Facts are your friend” become a common phrase in Dell Computers culture. “We are still the same company, marked by the same Dell drive and spirit, but we are better armed to make important decisions” said Michael Dell to conclude his interview.             Dell recognized ahead of time the need for speed, or velocity, quickening the pace at every step of business. The company learned that the more workers handled, or touched, the product along the assembly process, the longer the process took and the greater the probability of quality concerns (, 2002). Dell began to track and systematically scale down the number of “touches” along the line, even driving it to zero. The company took orders from customers and accomplished them by buying and assembling the needed components. Customers got exactly the configuration they desired, and Dell foreshortened its need for plants, equipment, and research and development department. As a result, Dell turned a product business into a service industry.             The chief financial objective that steered managerial evaluation at Dell was return on invested capital (ROIC). Dell’s scorecard included both financial measures (ROIC, average selling price, component purchasing costs, selling and administration costs, and margins) and non financial measures (component inventory, finished goods inventory, accounts receivable days, accounts payable days, cash-conversion cycle, stock outs, and accuracy of forecast demand). The scorecard was returned on a real-time basis, and related performance measures were broken down by customer segment, product category, and country (, 2001, ).             Dell Computers was fortunate to have a leader like Michael Dell who was a visionary and a dynamic catalyst. Michael Dell says his most important leadership responsibility is looking for “value shifts” in his company’s customer base. To identify the shifting needs of customers, he has to stay in close contact with them. To build customer intimacy and loyalty, Dell leverages its customers’ knowledge of their own unmet needs. Dell’s brand image was and is shaped by customer feedback. Summary of Dell Computers Value Chain Analysis Primary Activities Inbound Logistics Here goods are received from a company’s suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organization. Dell relies mostly on its highly reliable supplier, where Dell streamlines its operation and relies on its computer monitor supplier to ship directly to the customer. As long as its supplier retains its leadership position, Dell would collaborate with it to achieve mutual success. Operations This is where goods are manufactured or assembled. Every Dell system is built to order. Customers get exactly what they want. Dell uses knowledge gained from direct customer contact before and after the sale to provide award-winning reliability and tailored customer service.   Outbound Logistics When Dell introduced the direct model, its competitors were selling computers to end consumers via distributors. Dell, on the other hand, sells directly to consumers and is continuously communicating with them and benefiting, especially in two areas, seeing sales trends and learning about unmet customer needs. The company also relies on customers’ knowledge of what they want to purchase and when they want to complete the transaction to drive the direct business model. Dell leverages this source of customer knowledge by making it as easy as possible for a customer to place a customized order electronically.   Marketing and Sales Dells direct to customer model solve the problem for additional capital for marketing and sales. By selling directly to consumer it eliminated retailers along the way. One advantage of this kind of system is that the firm is continuously in contact with its customers and they are benefiting in two areas concerning sales and marketing, seeing sales trends and learning about unmet costumer demands. Service Dell spent dollars training well-educated business segment managers provide state-of-the art advice to customers. The company also initiated a collaborative customer-solution teams that collaborate with customers to fulfill any unmet customer needs. Because of the nature of work of Dell’s employees they are continually being inspired to stay abreast of technology threats and opportunities that may alter the competitive landscape in the future.     Support Activities Procurement It is on this activity that Dell is weak because Dell do not enjoy protected by trademark or patent or copyright technology. The technology being used in the industry is shared by all industry players. Technology Development Technology is an important source of competitive advantage. And here is one strength of Dell for the firm enjoys better access to technology. Dell introduces the latest relevant technology much more quickly than companies with slow-moving indirect distribution channels. Human Resource Management (HRM) Dell’s mission statement is “to be the most successful computer company in the world at delivering the best customer experience in markets we serve”. Dell employees, direct salespeople, help-desk operators, engineers, and the like all have to be knowledgeable and customer focused to ensure Dell’s continued competitiveness. Firm Infrastructure Dell revolutionized the traditional value chain of computer manufacturing industry by introducing the direct to customer model. Dell also employed a global business consultancy, to help it develop a set of metrics to judge business-unit performance. By doing so, daily decision making were more efficient. The chief financial objective that steered managerial evaluation at Dell was return on invested capital (ROIC). Which leads to no inventory build-up, Dell turns over inventory every six days on average, keeping related costs low. References: Credit:ivythesis.typepad.com

VALUE CHAIN

VALUE-CHAIN (DELL COMPUTERS INC.) Introduction to Value-Chain The Value-Chain was conceptualized and popularized by...

Sample Essay the Model Presented Below in Extract Value Chain Analysis of Production Model

PROCUREMENT FUNCTION

Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three supermarket chains (Woolworths, Coles and Aldi)

â€œUNDERTAKE A FULL VALUE CHAIN (COMPLEMENTORS) ANALYSIS OF THE AUSTRALIAN SUPERMARKET INDUSTRY AND ITS IMPLICATIONS ON EACH OF THE 3 SUPERMARKET CHAINS (WOOLWORTHS, COLES AND ALDI). SUPPORT WITH EVIDENCE.â€

VALUE CHAIN

â€œUNDERTAKE A FULL VALUE CHAIN (COMPLEMENTORS) ANALYSIS OF THE AUSTRALIAN SUPERMARKET INDUSTRY AND ITS IMPLICATIONS ON EACH OF THE 3 SUPERMARKET CHAINS (WOOLWORTHS, COLES AND ALDI). SUPPORT WITH EVIDENCE.â€