Value Chain - P2

Question 1

What is a value chain?

Answer 1

Linked set of value-creating activities starting from basic raw material sources through to end-use product or service delivered to the customer.

Question 2

What are the primary activities?

Answer 2

1. Inbound logistics – receiving, storing, materials handling, warehousing
2. Operations – Transferring inputs into final product
3. Outbound logistics – distributing final product
4. Marketing and sales – Inducing and facilitating buyers to purchase the product
5. Service – Maintaining or enhancing the value of the product

Question 3

What are the support activities?

Answer 3

1. Procurement – purchasing materials
2. Technology development – use of know-how, procedures to be applied and technological inputs required in every activity which forms part of the value chain
3. HR Management – entails selection, retention and promotion of staff
4. Firm Infrastructure – general management, accounting and finance, quality management and planning activities

Question 4

According to Porter what two strategies can an organisation use to develop sustainable competitive advantage?

Answer 4

1. Low-cost strategy – cost leadership, achieving lower cost than competitors
2. Differentiation strategy – involves creating something that customers perceive as being unique via brand loyalty, superior customer service, product design and features