Michael Porter is one of the first authors to use the term value- chain analysis in one of his books. Value chain analysis describes the activities an organization performs and links them with the competitive position of the organization. Value chain analysis describes all of the activities around and within an organization and relates these activities to an analysis of the competitive strength of the firm. As it follows, this analysis evaluates which value each specific activity adds to the services and products of the organization. Economists developed this ideology upon the insight that a firm is more than a random combination of equipment, machinery, money and people. Only if organizations arrange these elements into, systematic activates and systems it will be feasible to create products and services for which the consumers will be willing to pay a certain price. Porter points out that the ability of a firm to perform certain activities and manage the associations between these activities is a competitive advantage source(Strategic management).
Porter distinguishes between support activities and primary activities. The primary activities distinguished by Porter are those, which are directly involved in the delivery or creation of a service or product. One can place these primary activities under five main groups. These are the inbound logistics, outbound logistics, operations, service, marketing and sales. Support activities are linked to each one of these primary activities, which help to enhance their efficiency and effectiveness. There are four different areas of support activities. These include technology development, procurement, human resource management and infrastructure. Under infrastructure are systems for finance, planning, information management, quality, and many more (Strategic management).
Value chain analysis is an essential tool for the organization to work out how they can create the greatest possible value for its customers. In business, consumers pay to take raw inputs, and to add and increase the value to them by changing them into something of greater value to other people. It is easier to see this in manufacturing, in which case the manufacturer increases value by taking raw material of little use to the final user and converting it to products or services that buyers are enthusiastic to give money for, like converting wood pulp into paper. However, this ideology is just as essential as in service industries, where individuals make use of inputs of knowledge, time, systems, and equipment to make services of actualworth to the customers. To analyze the specific activities through which organizations create competitive advantage, it is essential to model or to arrange the organization as a chain of activities that create value. As already mentioned, Michael Porter identified a set of interrelated generic activitiesordinary to a broadrange of businesses. The resulting model is the value chain (Strategic management).
Organizations realize a profit depending on their ability to manage the associations between all the activities in the organization. This is to mean that an organization can only deliver products and services, which customers are willing to pay more than the total of the costs of the sum of activities in the value chain. These linkages are essential for corporate success. These linkages occur between the flows of goods and services, information and processes and systems for adjusting activities. As it follows, the linkages are about seamless information flow and cooperation between the activities in the present in the value chain. In most industries, it is unusual that a single organization is responsible for all activities from design of the product to production to final assembly of products to deliverance of completemerchandise and services to the ultimate consumer. In most cases, organizations are elements of a supply chain or a value system(Strategic management. The value chain).
Michael Porter introduced a generic chain model that is composed of a series of activities common to a wide variety of firms. Porter, therefore, came up with primary and support activities. The purpose of these activities is to offer consumers a degree of value that is more than the cost of the activities, therefore, resulting in a profit margin. The primary value activities include inbound logistics, operations, outbound logistics, sales, marketing, and service. In regards to the inbound logistics, the warehousing and receiving of raw materials and their distribution to manufacturers activities are required. Operations in this case refer to the processes of changing inputs into finished services and products. Outbound logistics, on the other hand, deals with the distribution and warehousing of finished goods. Sales and marketing is involved with the identification of the needs of customers and the generation of sales. Service in this case is concerned with the support of customers after the organization sells and distributes the services and products to consumers (Strategic management. The value chain).
The infrastructure of the organization supports the primary, which is composed of the organizational structure, company culture and control systems. Another activity that supports the main activities is the human resource management, which is composed of employee hiring, recruiting, training, compensation and development. Technology development is also another support activity, which includes such activities as integration of activities that support activities for creating value. Procurement is the last support activity that involves purchasing of inputs like supplies, materials, and equipment. The profit or margin of the firm, therefore, depends on it effectiveness in performing these activities effectively and efficiently, so that the amount that the consumer is willing to pay for the finished goods and services exceeds the cost of the production activities in the value chain (Strategic management. The value chain).
Part 2- Key Challenges Faced in Human Resource and Operations
Operational challenges are those challenges that include all of the step- to- step details which control how exactly various elements in the supply chain functions. One of the most common operational challenges is coming up with a manufacturing and production schedule that is well organized. A schedule for production affects numerous other variables and, therefore, must be designed carefully to fit appropriately into the whole picture. Other operational challenges and decisions include things like the process for planning daily activities and filling orders with all the activities involved in the supply chain. The shrinking world gives organizations numerous opportunities and benefits for business, but these are not without extending the scope of the organization’s logistic responsibilities. The days for depending on brokers to finish their end of the bargain managing a single facility are gone. Now organizations must act proactively in their efforts to put together the best possible circumstances for operations that are successful. This means addressing all of the issues and challenges that come with a supply chain that has numerous elements scattered all over the place(How a shrinking world).
Charles Wells Ltd has for a long time combined years of pub retailing and brewing with genuine spirit of enterprise and innovation. The organization has evolved to become an essential market leader in both industries and many have recognized the organization for its assimilation of change to remain competitive, yet retaining independence, by both consumers and trade alike. However, despite its success, numerous challenges, and especially those that have to do with operations have affected its excellence and competitive advantage. Other minor challenges with regards to human resource have also affected the effectiveness of the company in the market(About Charles Wells).
One of the main operational challenges that the Charles Wells has to do with the marketing and sales force of the company. The national sales force of Charles Wells Company has been selling services and products into the purchasing departments of a number of customers like major wholesalers and grocery stores. With this operational activity, a challenge arose. The challenge concerned with the fact that the national sales force had to ensure an increase and an improvement in the existing national distribution coverage and, therefore, the sales of all of its international brands by getting them in the front line of as many customers as possible. The strategy the company thought of using to deal with this challenge was to hire or recruit young staff that were fresh out of colleges and universities and to turn them into sales forces that were effective. Based at home, these sales forces would have to be mobile. They would also need to have the ability to communicate easily and work remotely hand- in- hand with the regional managers and the head office (Charles Wells’ adopts teleworking solution for mobile sales force).
The company came up with a solution. The solution was working from home; the sales force used PCs with modem Internet connection supplemented by fixed broadband Internet. They were also able to come by a CRM system that had some details of the customers. The database technology was extremely useful as it enabled the replication to the tablet PCs of the representatives so they could operate independently with the most current customer information and data available. To support this process, each member of the sales force was given a multifunction device that had several functions in one machine. The members could, therefore, print, scan and copy from one compact device, thus, reducing the impacts of technology within the home office and reducing the total space used, and most essentially print in either mono or color. This solution offered the company a number of benefits. The project to address this challenge was successful, as a result, of the close collaboration between network support, developers, users and sales management. As a result, the project is producing results, with numerous new listings. The results of the project are key elements to the success of the solution. This project is an excellent example of how IT and mobile technology strategies can be of use to numerous businesses such as Charles Wells Ltd in solving its technological and operational challenges(Charles Wells’ adopts teleworking solution for mobile sales force).
Part 3- Summary and Conclusion
Organizations have for a long time made use of the value chain framework for organizational strategic planning. The value chain framework indicates that the value chain of a firm is useful in understanding and identifying critical aspects to attain competitive strengths and key competencies in the marketplace. The model also shows how the value chain activities are connected together to ultimately establish the value for the customer. The five main activities and four support activities create a system that is interdependent that is tied together by linkages. Therefore, analysis of the value chain has to break down the main activities of the organization according to the activities stipulated in the framework, and assesses the potential for increasing value through the means of differentiation or cost advantage. Finally, it is essential to determine strategies that put their focus on those activities that would make it feasible for the corporation to achieve competitive advantage, which it can sustain.
The value chains of numerous organizations have gone through many modifications in the earlier years, as a result, of inventions, innovations and advancements in technology enabling change at an increasingly rapid pace in the environment of business. As we have seen in the case study, these rapidly changing technological environments in business have caused numerous challenges for the Charles Wells Ltd, which had to change its approach to sales and marketing by recruiting new sales forces, which were later trained using new technologies. The integration of mobile technology into the new marketing and sales tactics enabled the company to solve its challenges and turn its sales around to become more profitable. The company made came up with the solutions to its problems after breaking down the main activities of the organization according to those stipulated in the framework, and after assessing its potential for increasing value through the means of differentiation and cost advantage. As a result, the corporation was able to come upwith solutions and strategies that focus on the wanting activities, and which upon improvement would enable the company attain competitive advantage.
About Charles Wells. Charles Wells Pub Company. Retrieved from http://www.charleswells.co.uk/home/about
Charles Wells’ adopts teleworking solution for the mobile sales force. Together. Retrieved from http://www.brother.co.uk/display.cfm?id=124129&isAdmin=1
How a shrinking world creates new logistics challenges. Solusource. Retrieved from http://www.solusource.com/tominfo/WhitePapers/Shrinking%20World%20Creates%20L ogistics%20Challenges.pdf
Strategic management. The value chain. QuickMBA. Knowledge to Power Your Busines Retrieved from http://www.quickmba.com/strategy/value-chain/
Strategic management. Value chain. NetMBA. Business Knowledge Center. Retrieved from http://www.netmba.com/strategy/value-chain/
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