Firms as a value chain Flashcards
What is a value chain?
A value chain is a series of consecutive steps that go into the creation of a finished product, from its initial design to its arrival at a customer’s door. It allows firms to understand the parts of its operations that create value and those that don’t. It also helps you find what are your core competencies, and what you can delegate to other people.
What are the two main components of a value chain?
Primary activities
Support activities
What do the primary activities in a value chain consist of? (will depend on industry)
- In bound logistics
supply of propducts/materials, u get the stuff - Product Design
- Operations
assembling ur stuff into things in ur factories - Outbound logistics
u get ur products out to the consumers - Marketing & sale
- Service
What do the support activities in a value chain consist off?
- firm infrastructure
ur physical location, buildings ur in
or accounting, finance, legal, safety and security, quality control, … - Human resource management
identity + assess talent, deploy them properly and provide trainings - technology development
systems, solutions - procurement (diff from inbound logistics)
all other things u procure thats not for ur product, ie getting paper for printing, pretty general in nature
When is an activity a source of competitive advantage?
To be a source of compet adv, a resource or activity must allow the firm to perform an activity in a manner that is superior to the way competitors perform it, OR a value-creating activity that competitors cant complete
What are the different types of configurations of a value chain?
Concentrated = putting all value chains activities in one location
Dispersed = performing different value chains activities in different locations
What must one consider when configuring a firm’s value chain?
○ where to go
○ business env quality
○ innovation context
○ economies of scale
○ labour costs
○ logistics
○ digitization
what is the difference between outsourcing and off-shoring?
outsourcing = when a firm externalises (contracts out) certain functions
off-shoring = when a firm shifts a function overseas
What are some factors playing into the decision of offshoring?
- focus on labour costs
- skilled IT at lower costs
LIMITS: rising labour costs, distance from homemarket, risk of loss of IP and creating rivals
What are some factors playing into the decision of reshoring?
- automation making labour cost less significant
- being closer to market, faster responses, shorter logistics
- proximity for R&D and manufacturing
- reputational boost