Name of Institution

Concept of Value Chain Analysis

Coverage in session

Name of Institution

In this session , we will study about Concept of Value Chain Analysis

Basics

Name of Institution

How do we calculate Profit Revenue- Cost= Profit/value Final Objective of any business Final product must yield value to customers /business/market Customer- quality product at low cost Business Net profit with sustainability in the market and constant demand Market wants- Availability of quality product at competitive prices as compared to rivals.
3

Value Chain in Business

Raw Material

Name of Institution

Design/process

Build Manufacturing Process

Develop Agreements

Provide customers/marketing

Value Chain

Name of Institution

Value Chain is the linked set of value creating activities beginning with raw material coming from suppliers to series of value added activities involved in production and marketing a product or services ending with distributors and getting final goods in the hands of ultimate consumers. - VCA- means way of looking at business as a chain of activities that transforms inputs into outputs that customers value. - Value Chain Analysis is a useful tool for working out how you can create the greatest possible value for your customers.
5

Where do customers derive the value from

Activities that differentiates the product. Activities that lower its cost Activities that meet the customer need quickly.

Name of Institution

Value Chain attempts to understand how a business created customer value with its various activities.

How VCA is created

Name of Institution

Step 1- Divide business into set of activities (Primary /Support) Step-2 Look at the costs associated with each step to determine cost advantages/cost disadvantages. Step-3 Analyze each activity between purchase and saleshow it differentiate the product Step-4- Determine weakness/strengths of a company
7

Difference between Primary and Secondary

Name of Institution

Primary activities- Those activities involved in physical creation of product, marketing and transfer to buyer and after sale support. Support Activities-Overhead functionsassist the firm by providing infrastructure and inputs that allow primary activities to happen.
8

Model of VCA
Support Activities General Administration Operations Outbound Logistics procurement

Name of Institution

Inbound Logistics

Operations

Outbound Logistics

Marketing and sales

Services

Primary Activities

VCA has markup above cost , as part of price paid by customer- Business margins
9

Conducting a VCA

Name of Institution

Identify Activities Allocate cost Recognize the difficulty in Activity based Cost Accounting Identify the activities that differentiate the firm Examine the Value Chain Value chain activities as strength /weakness.
10

Where to find information of value chain

Name of Institution

Up to three years of annual reports of the company can be analyzed to see how the costing of the activities are changing over the period and whether they are in unison with the competitive strategy of the firm. These annual reports of the company can be compared to the annual reports of the key competitors in order to see how competitive strategies differ between the companies, along with finding the difference in the contribution of activities to the companys profitability. SWOT analysis of companies journal articles, trade publications and magazines are useful sources of information to identify how value is created in the particular industry in which the company operates and which activities play a key role in the generation of that value.

11

Limitations of VCA

Name of Institution

Describes only Industrial Organizations that convert raw material into final product. Applicability in service industry is not clear It says the value of the product is assessed when product reaches final customer, but actually assessment of value is done before as well.

12