E commerce chapter 2 (WOW)

Value Chain

is used to describe all the business activities it takes to create a product from start to finish (e.g., design, production, distribution, etc.).

Elements in Porter’s Value Chain

Elements in Porter’s Value Chain

Rather than looking at departments or accounting cost types, Porter’s Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers.

Using this viewpoint, Porter described a chain of activities common to all businesses, and he divided them into primary and support activities, as shown below.

• Inbound Logistics

These are all the processes related to receiving, storing, and distributing inputs internally.

Your supplier relationships are a key factor in creating value here.

• Operations

These are the transformation activities that change inputs into outputs that are sold to customers.

Here, your operational systems create value.

• Outbound Logistics

These activities deliver your product or service to your customer.

These are things like collection, storage, and distribution systems, and they may be internal or external to your organization.

• Marketing and Sales

These are the processes you use to persuade clients to purchase from you instead of your competitors.

The benefits you offer, and how well you communicate them, are sources of value here.

• Service

These are the activities related to maintaining the value of your product or service to your customers, once it’s been purchased.

Support Activities

These activities support the primary functions .

• Procurement (Purchasing)

This is what the organization does to get the resources it needs to operate.

This includes finding vendors and negotiating the best prices.

• Human Resource Management

This is how well a company recruits, hires, trains, motivates, rewards, and retains its workers.

People are a significant source of value, so businesses can create a clear advantage with good HR practices.

• Technological Development

These activities relate to managing and processing information, as well as protecting a company’s knowledge base.

Minimizing information technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation.

• Infrastructure

These are a company’s support systems, and the functions that allow it to maintain daily operations.

Accounting, legal, administrative, and general management are examples of necessary infrastructure that businesses can use to their advantage.

1. Cost Leadership

The goal of a cost leadership strategy is to become the lowest-cost provider in your industry or market.

Companies who excel with a low-cost strategy have extreme operational efficiency and use low-cost materials and resources to reduce the overall price of their product or service.

2. Differentiation

the competitive advantage is gained by offering a unique or highly specialized product or service.

The business needs to dedicate time and resources to innovation, research, and development.