Digital Marketing - Study Notes:
The concept of value chain
Competitive advantages come from the way organizations configure their business model. In particular, a successful company must be able to perform the necessary value-adding activities in order to actually develop and supply the superior product offering in an effective and efficient manner.
These value-adding activities – such as R&D, HR, production, logistics, marketing, and sales – are jointly referred to as an organization’s value chain. If organizations are to achieve competitive advantage by delivering value to customers, managers need to understand which of the organization’s activities are especially important in creating that value, and which are not. This can then be used to model the value generation of an organization.
Michael Porter’s Value Chain model distinguishes between two types of activities:
- Primary activities: These are activities directly concerned with the creation or delivery of a product or service.
- Supporting activities: Each of the groups of primary activities is linked to support activities which help improve the effectiveness or efficiency of the primary activities.
Different types of companies have different value chain configurations (Johnson et al., 2017).
As an example, primary activities for a typical manufacturing company can include:
- Inbound logistics: Receiving, storing, and distributing inputs to the product or service, including materials handling, stock control, and transport
- Operations: Machining, packaging, assembly, and testing
- Outbound logistics: Collect, store, and distribute the product or service to customers (For example, warehouse, materials handling, and distribution)
- Marketing and sales: Sales administration, advertising, and selling
- Service: Installation, repair, training, and spares
Support activities for the same type of manufacturing company might include:
- Procurement: Acquisition of the various resource inputs to the primary activities
- Technology department: Technologies directly related to a product (for example, product design), to a process (for example, process development), or to a particular resource such as raw materials improvements.
- Human resource management: Recruiting, managing, training, developing, and rewarding people within the organization.
- Infrastructure: Planning, finance, quality control, information management, and the structure of an organization
Heather Gough
Heather Gough is BPP’s Head of Digital Product Management which delivers support and learning through BPP’s online learning environment, The Hub. Her experience in this area also includes senior roles in strategic, setup and live online delivery of learning.
As an economics graduate Heather started her career in audit and assurance, becoming an ACA qualified Chartered Accountant at PwC. Her experience also covers teaching for over 15 years, programme management and overseeing client relationships.
By the end of this topic, you should be able to:
- Assess the sources of competitive advantage that a global firm might possess
- Analyse and explore how competitive advantage is built and maintained
- Critically evaluate the concept of the value chain and be able to apply it in assessment terms for a global enterprise
- Evaluate approaches to global supply chain management and how technology can enable competitive advantage
