Strategic Management Porter’s value chain analysis

            In the business, the importance of porter’s value chain is very considerable and also used in all type of organization to make their activities more smooth and manageable. This concept is used in the management of the business. According to Michael Porter, the value chain includes all those activities that help to create the customer’s value by the company. The value-added through the value creation moves to competitive advantages that are beneficial for the organization in many ways. When the value going to add in the product of the organization than its profitability also going to increase so the value creation is a very effective tool used by the organization to generate more profit and get more benefit from its product in long term. The approach of the porter’s value chain considers its strongest point because it directly focuses on the demand of customers and set all activities and manages the system to give great importance to its customers rather than any other department or any type of expenses that belong to the business. In this analysis, a complete system going to explain that show how the systems and their internal activities are connected with each other and how they show a positive effect on profit and cost of the organization so that their effect clearly mention. Customer is the main target of every organization and with this organization need to give great attention to the customers and their link with the organization through its product or services. This value chain analysis also focuses on how the sources of the organization are used in a better way to generate the value and also how the organization save its cost in the utilization of its resources and enhance the value of a product to attract the customers and also make a strong reputation of organization among the customers. (Bhasin)

            In other words, it can be explained that organization all events occur in the form of chain that starts from the raw material as its procurement department and end to delivery of goods with the after-sale services provided to its customers. Normally nine steps include in the value chain but the number of steps can be changed according to the final product. This value chain analysis helps the product to differentiate from other products of the competitors and porter’s value chain work according to the current market situation that explains the new demand and requirement of the product that comes from the customers. So the cost advantages and differentiation advantages are part of the value chain and the basic aim of the organization to using the porter’s value chain to make its product different and prominent from other products. Customer is going to attract toward that product because of its different attributes and this will help to create a better customer relationship with their customers in long term and also promote the company due to its uniqueness and better product quality.

            Normally manufacturing companies use this analysis to produces one better product using raw material. A large range of product going to present for the customers with the services that can provide more advantage to all its customers.  the profit margin of the company also determine with the created value as captured and created value –value and its creating cost = profit margin of the organization. So it can also explain that the profit of the organization can to maximize if the value of the product going to increase day by day among customers and also build more competitive advantages.

Now we are going to discuss the primary and secondary activities of the porter’s value chain and explain how they affect the organization and create value for the organization.

Primary activities of Strategic Management Porter’s value chain analysis

        The primary activities of the porter’s value chain have a direct effect on the product production, its maintenance its sales and all the related activities that help to produce the product and also it’s selling through effective channels and provide better profit ratio to the company. The primary activities include production, inbound logistics, outbound logistics, services, marketing, and sales.

       Production: in primary activities, the production is the main activity that includes all those steps that are performed for making the product raw material to proper product. It simply converts the input product or service to finished product that s ready to use for the customer, for the creation value the operational system is work as guiding principles in the organization. These are also known as transformational activities because they change the input and raw product to output produce that can be used by the customers for any purpose. So value added at this step of the value chain.

       Inbound logistics: this activity includes all the process used within the organization to receive, store And distribution of raw material or other main elements that are necessary for the product development. Supplier is the main person in this step because without supplier the input material never obtains by the organization for the production processes. Supplier relationship is the key factor in this regard. The whole step occurs inside the organization because the ingredient keeping is the responsibility of internal management of the organization and then provides this to the production sector for making the final product of the organization.

     Outbound logistics: outbound logistics include all those activities that belong to providing the final product or service to customer from the premises of the organization. Because without this step no customer can obtain the product after its production so delivery of the product is very important in this regard. The proper distribution system, transport system through channels, storage areas must be required in this step. Because without proper distribution channels the product never reached to the customer and the customer never obtain its required product form the organization. After production, this step is very important because distribution is the main part of every organization.

     Services:  this includes all those steps that provide the services to customer related to the product and maintain the value of the product because the procurement service and product are also making a strong relationship with customers. So a proper system is going to develop to maintain the organizational growth and service management in the organization related to any product. This activity is used after the purchase of the product by the customer than to maintain the product customer utilizes the service of the organization.

      Marketing and sales:  at this step the complete processes of marketing and sales of the product include that put the product or services into the market and generate the customer relationship and managing the sales of the product ineffective way. It follows the guiding principles for creating the advantage of customers and also compete with the other organization‘s product in the same market. Proper marketing strategies and processes must be used by the organization because without advertisement the product is not going to be common among the customers and effective system of sales also used by the organization to make its sale more effective and easy to get approach to the product with effective mean of sales.

Supporting activities of Strategic Management Porter’s value chain analysis

            The secondary activities are also part of the porter’s value chain and they support and assist the primary activities and also develop the basis of the organization through its effective system, there are some supporting activities in the value chain; infrastructure, human resource development, technological development, and procurements.

        Infrastructure:  this includes all the supporting activities that help in the organization to smoothly maintain the daily operations in an effective manner. The infrastructure of the organization includes all those activities and processes that are necessary for the organization to run its operations and get the required results. For creating the value of organization this step includes financial management, administrative handling, and line management in the organization. This is very important o make the system of the organization going to be more effective and smooth because with this the production of the organization comes at endpoint on time and it also helps to generate the profit without any loss.

     Human resource management: human resource management includes all the supporting activities that maintain the workforce of the organization and work for its development. Human resource is the key element in every organization because without this no any organization run is operations. The retaining staffs, compensation, coaching of staff, training and recruiting of staff all are included in the human resource management. The appointment of human resource at every step according to need and requirement is a very important task and human resource management must aware of all the requirement of the organization so they appoint the staff in a better way.

       Technology development: the technology development is also very important in the organization because it is important to bring the development in the product and services according to new demand and time and this must be happening at internal and external directions. By using innovation and optimization these activities are creating value in the product. The development of a new product based on new technologies, technological improvement and innovation and IT all are the example of technology development. Technology development is very important for an organization because outdated technology makes the value of product down and the demand also going to decrease in the market.

        Procurement:  this step includes all those activities that belong to procurement to customer service in the organization because procurement is the major part of every organization. Outsourcing agreement, product purchase agreement with suppliers, obtain the best price after negotiation, managing the effective relationship with the supplier and manage the complete setup to run the processes of the organization smoothly and without any disturbance. For creating valuable products, services and distinctiveness, organization use all these primary and supporting activities to run the complete system in a better way and also provide better results as required by the organization. (toolshero.com)

 Identify opportunities to create competitive advantages

            For creating the competitive advantages of the organization it is important to develop a process that provides all the key elements in the organization and make all the activities more effective. In the value chain first organization has to identify the further activities in the primary activities that include three different activities like direct activities include online sales, indirect activities that include regular up to date programs in term of marketing and quality assurance activities that include editing and proofreading of the marketing of the product. Then identify a better way to identify how the primary activities connect with the supporting activities and how they generate better results for the organization. The connection between primary and supporting activities make the system of the organization more effective and provide a better response. Then it is important o understand that how to create a link with the value-added in our product by utilizing all the activities. This point increases the competitive advantages in the organization because when the market runs in the competition environment then the proper value added is going to be an important part of the organization and to generate more profit for the organization. Then the value chain analysis also identifies what activities are increasing the value of the product by creating added value through optimization. Proper investment by the organization must require enhancing the profitability, maintaining competitive advantages and maintaining a strong relationship with customers.

            The value-added is the cost advantage for the organization because when the value-added in the product then its cost going to minimize and generate more profit margins. The differentiation advantages also important for the product because more different the product will attract more customer in the market and with this many benefits also obtain by the organization As its marketing strategies enhance the product promotion in the market and customer preferences to select the product that has new value addition and also provides in most reasonable prices.

So it can be said that porter’s value chain analysis is the best tool to add the value in the product of the organization and also provide better results in the form of profit. (mindtools.com)

Reference of  Strategic Management Porter’s value chain analysis

Bhasin, Hitesh. Porter’s Value Chain – Value Chain of Porter. n.d. 21 may 2019. <https://www.marketing91.com/value-chain-porter/>.

mindtools.com. Porter's Value Chain. 2019. <https://www.mindtools.com/pages/article/newSTR_66.htm>.

toolshero.com. Porter’s Value Chain Analysis. 2019. <https://www.toolshero.com/management/value-chain-analysis-porter/>.