RSM392 MidtermPRIMARY ACTIVITIES (IMOOS)

PRIMARY ACTIVITIES (IMOOS)

• Inbound logistics: activities to receive, store and transport inputs to products (warehousing, inventory, control)

• Operations: activities to convert inputs into products (assembly, packaging)

• Outbound logistics: activities to collect, store a d distribute final products;

• Marketing and sales: activities to provide means through which consumers can buy products and to induce them to do so;

• Service: activities to enhance or maintain product’s value (repair, installation)

Inbound logistics:

activities to receive, store and transport inputs to products (warehousing, inventory, control)

Operations:

• activities to convert inputs into products (assembly, packaging)

Outbound logistics:

• activities to collect, store andd distribute final products;

Marketing and sales:

• activities to provide means through which consumers can buy products and to induce them to do so;

Service

• activities to enhance or maintain product’s value (repair, installation)

SUPPORT ACTIVITIES (PTHI)

Procurement:

Technological development:

Human Resource Management

Infrastructure:

Procurement

•  activities to purchase the inputs needed to produce products

Technological development:

innovation and R&D

Human Resource Management:

• activities to recruit, hire and train personnel

Infrastructure:

• other general management activities (accounting, finance, legal support)

• Each activity can effect perceived benefits and costs. 

• A valuable activity for managers is to take firm’s value chain and identify the impact of each activity on WTP and C

Using the value chain

• Go over activities and analyze costs.

• Identify cost drivers = factors that make the cost of an activity rise of fall

• Cost drivers are extremely useful to infer competitor costs. You cannot directly observe the costs but drivers usually are (market share, preservatives)

• Identify activities that explain significant fraction of costs 

• Identify activities that explain differences across competitors

Willingness to pay

• go over value chain to understand how activities shape willingness to pay

• Assess how each activity affects PSPC

  • • Product characteristics (quality, performance durability)

  • • Sales and delivery experience (convenience, quality of sale staff)

  • • Post sale experience (service, complementary goods)

  • • Consumer perception (advertising

Horizontal differentiation

•  (consumers rank product differently at zero price) for novel vs business book

Vertical differentiation

(consumers rank product the same at zero price but differ in willingness to pay for higher quality) laptop with 500 GB hard disk vs 2TB hard disk

Cost Leadership

• A cost leader creates more value (WTP‐C) by generating a value‐stick with lower C than its rivals.

• Cost leaders concentrate on finding ways to reap large cost savings with only slight decrease in customer willingness to pay.

• Strategy: constantly rethink how to complete the primary and support activities and reduce costs.

  • Examples: economies of scale, lower input costs, special technology, different business model. 

Differentiation and benefit leader

• A benefit leader creates more value (WTP‐C) by creating a value stick that has a higher WTP than its rivals

• Benefit leaders concentrate on finding ways to raise willingness to pay a great deal with only slight increase in cost

• Strategy: consistently upgrade differentiated features that customers value. Try to be unique at something or be perceived as unique

Competitive Scope

• Broad Scope

  • The firm competes in all or most customer segments

• Narrow Scope

  • The firm selects a segment or a few segments in the industry and tailors its strategy to serving them at the exclusion of others