Lecture 6: Value chain Flashcards
What is the basic value chain of primary activities?
- Design
- Inbound Logistics
- Operations
- Outbound logistics
- Marketing and Sales
- Service
**Sometimes design and/or inbound logistics are listed
as supporting activities rather than primary activities
def. value chain
the series of value-adding activities
that occur as a product moves from R&D conception
to raw materials through production to final distribution and after-sales service
def. vertical integration
when a company owns the entire value chain, or at least a significant part of it
what case is a good example for value chain?
Zara, Apple
describe in-house/ insourcing
- Develop, extend and leverage firm’s capabilities
- Preserve flexibility / make quick adjustments (Zara)
- Retain control of IP
describe outsourcing
• Focus only on core
competencies
• Cede low-value or less strategic activities to external specialists
• Benefit from industry best practices
def. outsourcing
when a firm externalizes (contracts
out to another firm) certain functions
– Examples: IT functions, manufacturing, contract R&D,
back-office functions
def. off-shoring
when a firm shifts a function overseas
– Examples: manufacturing shifts from home country A to country B
are off-shoring and outsourcing exclusive?
no
def. nearshoring
a less aggressive form of offshoring whereby an MNE transfers an activity to a neighbouring or nearby country
def. offshoring
relocating a value activity to a different country that either remains within or moves outside the MNE
def. onshoring
relocating a business process or work unit to a more productive, lower-cost location in the home country (a domestic shift)
def. reshoring
returning an activity from the foreign location to the country where the work had originally been done
ie not necessarily return to the home country
def. homeshoring
home-based staff handle activities that had previously been offshore to foreign locations
What are some factors in off-shoring
• Focus on labour costs – China, also Mexico, India, Southeast Asia • Skilled IT at lower cost – India • Limits: – Rising labour costs – Distance from home market • Risk if outsourcing – Loss of IP, creating rivals
