VALUE CHAIN

Question 1

What is the value chain?

Answer 1

1. A set of generic activities performed by an organisation.
2. Considers all activities involved in delivering product/service from conception to disposal.

Question 2

What does value chain analysis help us do?

Answer 2

1. Understand costs. Where can we reduce costs?

2. Introduce changes that customers will be willing to pay for.

Question 3

Value chain analysis is a tool to…

Answer 3

analyse how a firm could be more effective and efficient.

Question 4

Discuss process links.

Answer 4

• Activities within and outside of an organisation may be linked.
• These activities are interdependent
• These activities need to be coordinated
• An increase in costs in one area may lead to a decrease in costs in another.
• -> This idea links to IOCM. Supplier makes an improvement to its distribution model which lowers costs for buyer. Relationship sharing of cost savings.

Question 5

What are cost and value drivers?

Answer 5

Cost drivers: influence time, amount of materials used, and quality of production for each activity.

Value drivers: Increase the likelihood that a buyer will buy

Question 6

Name Porter’s 10 cost and value drivers.

Answer 6

1. Scale
Learning
Capacity utilisation 
Linkages
Inter-relationships
Integration
Policy choices
Institutional factors
Timing
Location

Question 7

What are the key strategic success factors for low cost strategy?

Answer 7

• Economies of scale
• Transfer of best practice to sister units
• Economies of scope
• Superior low-cost production technologies

Question 8

What are the key strategic success factors for differentiator?

Answer 8

• Unique styling/superior product design
• Customisation
• Speed
• Convenient access
• Unusually high quality
• Superior brand image