Value Chain Analysis Essay

1217 Words Dec 13th, 2006 5 Pages
Value Chain Analysis
Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by
…show more content…
Going back to our example used for inbound logistics, in the case of the new physician's technology, operations would involve those activities necessary to convert the raw materials into the finished products. Operations, in this case, would involve component assembly and software installation, as well as packaging.
Once inbound logistics and operations are complete, the next step is outbound logistics. Outbound logistics are "activities associated with collecting, storing, and physically distributing the product to buyers" (Stabell and Fjeldstad, 1998, p 417). This may be an area where combining more than one methodology may be appropriate. For example, if products are completed and stored in warehouses until orders are received, this could have a negative effect on the organization's profit margins. But in analyzing the value chain it may have been identified that switching to a Just-in-time method of delivery may be more cost effective. The organization could look at the outsourcing of components and the reliability of suppliers. If the tools and suppliers are able to meet the demands, then the organization would be able to improve profits by not needing to store as many products. Outbound logistics would also involve distribution of the product to the client. Will distribution be through inside sales, retailers, outside sales, Internet, or some other mode?
Marketing and Sales is an important part of the value chain analysis. Marketing and sales involves

Related Documents