Value chain analysis involves creating a systematic set of steps that incrementally add value to goods or services produced. The process starts with pre-production factors, progresses through production, marketing, and selling, and includes back-end services and support. The chain segregates essential activities into primary and support categories and considers costs and benefits associated with administrative, marketing, and other factors. This model helps increase the chances of success and helps position the company to compete in the market.
Also known as value chain analysis, a value chain is a strategy that involves creating a systematic set of steps or activities that incrementally add value to the goods or services produced. With this approach, it is understood that each and every activity involved adds a little more value to the finished product. In the event that a step does not appear to add value, it is closely evaluated to determine if the step is necessary for the production process. If so, steps are taken to find ways to add some kind of value at that point in the process.
With a true value chain, the process starts with looking at pre-production factors, progresses through the production process, and then moves on to marketing and selling the products. Activities will also include the actual delivery process of the products and any back-end services and support that are required to maintain a healthy customer relationship. The chain also addresses issues such as human resource support, research and development, and other factors that indirectly contribute to the production of the product. This often involves segregating the various essential activities into two main categories: primary and support.
The main activities in a value chain are those that focus on the actual creation and manufacturing of the product. A primary activity would include receiving raw materials, setting up the shop floor itself, and packaging finished goods. Support activities would include the development of the product itself, the ongoing support and training of employees under the auspices of a human resources department, and the cost of managing those employees. Another support mechanism in the value chain is the acquisition of high-quality raw materials, but at the lowest possible cost.
With a value chain, each facet of the operation is structured in a way that adds some kind of tangible or intangible value to the ultimate goal of producing products that are desirable to consumers. This approach is more comprehensive than other strategies, as it goes beyond the simple production process and considers the costs and benefits associated with administrative, marketing, and other factors that ultimately play a role in attracting and retaining customers. By looking at every aspect of the process, beginning with the acquisition of raw materials and ending with ongoing customer satisfaction, this model helps increase the chances of success, and thus helps position the company to compete in the market. more efficient way.
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