Firms as a value chain

Question 1

What is a value chain?

Answer 1

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.

Question 2

What are the two main components of a value chain?

Answer 2

Primary activities
Support activities

Question 3

What do the primary activities in a value chain consist of? (will depend on industry)

Answer 3

1. In bound logistics
   supply of propducts/materials, u get the stuff
2. Product Design
3. Operations
   assembling ur stuff into things in ur factories
4. Outbound logistics
   u get ur products out to the consumers
5. Marketing & sale
6. Service

Question 4

What do the support activities in a value chain consist off?

Answer 4

1. firm infrastructure
   ur physical location, buildings ur in
   or accounting, finance, legal, safety and security, quality control, …
2. Human resource management
   identity + assess talent, deploy them properly and provide trainings
3. technology development
   systems, solutions
4. procurement (diff from inbound logistics)
   all other things u procure thats not for ur product, ie getting paper for printing, pretty general in nature

Question 5

When is an activity a source of competitive advantage?

Answer 5

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

Question 6

What are the different types of configurations of a value chain?

Answer 6

Concentrated = putting all value chains activities in one location

Dispersed = performing different value chains activities in different locations

Question 7

What must one consider when configuring a firm’s value chain?

Answer 7

○ where to go
○ business env quality
○ innovation context
○ economies of scale
○ labour costs
○ logistics
○ digitization

Question 8

what is the difference between outsourcing and off-shoring?

Answer 8

outsourcing = when a firm externalises (contracts out) certain functions

off-shoring = when a firm shifts a function overseas

Question 9

What are some factors playing into the decision of offshoring?

Answer 9

• focus on labour costs
• skilled IT at lower costs

LIMITS: rising labour costs, distance from homemarket, risk of loss of IP and creating rivals

Question 10

What are some factors playing into the decision of reshoring?

Answer 10

• automation making labour cost less significant
• being closer to market, faster responses, shorter logistics
• proximity for R&D and manufacturing
• reputational boost