Section 4: Value Chain

Value Chain

A chain of business activities that creates value as inputs are converted into products or services for customers. Clue words: primary activities, support activities, create value. Example: materials move from receiving through manufacturing, shipping, sales, and service. Fill-in: A firm's connected value-creating business activities are its ______ chain. Answer: value.

Primary Value-Chain Activities

The five activities directly involved in creating, selling, delivering, and supporting a product or service: inbound logistics, operations, outbound logistics, marketing and sales, and service. Clue words: direct product/service activities. Example: assembling a product and delivering it to a retailer are primary activities. Fill-in: Operations and service are ______ value-chain activities. Answer: primary.

Support Value-Chain Activities

Activities that support the primary activities: procurement, technology development, human resource management, and firm infrastructure. Clue words: support, buying, HR, technology, finance/legal. Example: recruiting employees and developing a cheaper manufacturing method are support activities. Fill-in: Procurement and HR are ______ value-chain activities. Answer: support.

Inbound Logistics

Receiving, storing, and distributing raw materials or partially completed materials to production. Clue words: receiving dock, raw materials, warehouse before production. Example: receiving sheet metal and placing it in raw-material storage is inbound logistics. Fill-in: Receiving raw materials is ______ logistics. Answer: inbound.

Operations

Value-chain activities that transform inputs such as materials and labor into finished goods or services. Clue words: manufacture, produce, convert inputs. Example: converting sheet metal and labor into finished appliances is operations. Fill-in: Turning materials into finished products is ______. Answer: operations.

Outbound Logistics

Storing finished goods and distributing them to customers or retailers. Clue words: finished goods, delivery, shipping, warehouse after production. Example: warehousing finished appliances and arranging delivery to retailers is outbound logistics. Fill-in: Shipping finished goods to retailers is ______ logistics. Answer: outbound.

Marketing and Sales

Activities that promote products, identify buyers, and create sales. Clue words: promotion, customer analytics, buyers, coupon offer. Example: using customer analytics to identify buyers likely to respond to a promotion is marketing and sales. Fill-in: Promotions and customer targeting support ______ and sales. Answer: marketing.

Service

Value-chain activities that support customers after the sale. Clue words: warranty, repair, after sale, customer support. Example: scheduling warranty repairs after a product is sold is service. Fill-in: Warranty repairs are a ______ activity. Answer: service.

Procurement

A support activity involving purchasing inputs, supplies, materials, and equipment from suppliers. Clue words: purchasing, supplier price, supplier quality, sourcing. Example: comparing supplier price, quality, and delivery performance supports procurement decisions. Fill-in: Buying raw materials is ______. Answer: procurement.

Human Resource Management

A support activity involving recruiting, hiring, training, evaluating, and compensating employees. Clue words: employees, hiring, training, compensation. Example: recruiting, training, and compensating plant employees is human resource management. Fill-in: Employee training is part of ______ resource management. Answer: human.

Technology Development

A support activity involving improving products, processes, systems, and production methods through technology or innovation. Clue words: develop method, innovation, improved process. Example: developing a lower-cost manufacturing method is technology development. Fill-in: Creating a new manufacturing method is ______ development. Answer: technology.

Firm Infrastructure

A support activity that includes legal, finance, accounting, executive management, planning, and general administration. Clue words: legal, finance, executive management, corporate support. Example: providing legal, finance, and executive-management support is firm infrastructure. Fill-in: Legal and executive support are part of firm ______. Answer: infrastructure.