HomeProductsAccountingA Guide to Value Chain: Definition, Types, and Strategy

A Guide to Value Chain: Definition, Types, and Strategy

To find out how well a business makes a product, you need to do a product analysis. A type of analysis called a value chain analysis is used the most often. This is one of the ways a company tries to figure out how it helps its customers. One way to figure out how much value a company adds is to look at how many different things the company does.

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This chain includes things that happen because of supplier and customer relationships. The two things may seem like they aren’t connected, but they are. Managers can also use value chain analysis to figure out where their company stands on a specific value, which can help them stand out from their competitors. To find out your effective and ineffective marketing efforts by identifying the sources of your prospects, you can use the best Sales CRM system from HashMicro. Read the following article to learn more:

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Understanding Value Chain

The value chain is a business strategy seen as a succession of operations that turn inputs into valuable outputs to consumers. This notion serves as a platform for imagining how businesses may create value. If effective, this will almost surely result in increased profitability.

In conclusion, value chain activities lead to the creation of more value. Businesses may increase profitability by adding value to each action. This helps the company to establish and sustain a competitive edge.

Two prerequisites exist for businesses to utilize the value chain as a cost management analysis tool. This enables companies to make sound strategic choices in escalating commercial rivalry. Among these needs are the following:

  • Cost data for each activity to aid in value chain development
  • Information to assist with the product’s lifecycle 

Read also: What is Hybrid ERP System?

The Function of Value Chain 

value chain
Sumber: knic.co.id

The primary goal of creating a value chain is to raise a business’s earnings by lowering its manufacturing costs. Additionally, the value chain maximizes the value and use of the items generated by the organization. Among the other roles of the value chain are the following:

  • Retaining allegiance via consistent creation of higher value.
  • Identifying operations inside the manufacturing system to identify the company’s vulnerabilities and limitations.
  • The corporation earns money in the long run.
  • Facilitate the research and development of goods by businesses.
  • Assist with the product design process to ensure that high-quality goods and marketing operations function smoothly.
  • Assist companies with their manufacturing processes, particularly cost efficiency and product quantity.
  • Expanding market potential and streamlining product sales procedures.
  • Concentrate your efforts on critical areas where value generation may be enhanced.
  • Do not waste time on non-essential tasks; instead, focus on those that may help you create more value.
  • The most excellent way to create value is to concentrate on those areas where it is possible to do so.

Types of Value Chain 

When a company is doing analysis, they use it as a strategy to improve the value of their business for the better. This analysis can help companies focus more on strategic plans when they want to become more competitive. This value chain analysis is divided into the following two parts:

1. Primary activities

Primary activities in the value chain are all business activities that add value or benefit customers and show off the company’s uniqueness to the market. This is thought to be an essential part of running a business. The following two steps make up this value chain analysis:

  • Inbound logistics is what a company does when it receives, stores, and distributes inputs.
  • Outbound logistics is what a company does when it sends products or services to customers.
  • Operations, which are activities that change inputs into outputs in finished products, are called operations. It is marketing and sales, which is a group of things that happen in connection with advertising.
  • Service, which includes things like training, repair, and maintenance, is what we’re talking about.

2. Support activities 

Support activities are those that contribute to the overall success of the business. The issue is building an infrastructure that can support the most basic activities. The following are some examples of complementary activities:

  • Firm infrastructure operations include expenses and assets and general management, accounting, finance, information security, and information system safety.
  • Procurement is a term that refers to the process of acquiring resources. A buying function is an example of this in a company’s value chain.
  • Technology development is an activity that encompasses everything from product cost reduction, process improvement, equipment design, computer software development, telecommunications system development, and the addition of new database capabilities to the development of computer-based system support.
  • Human resource management is a process that involves the recruiting, training, development, and pay of all sorts of staff, as well as the enhancement of workers’ skill levels.

Read also: Production Process in Business: Definition, Types, and Characteristics

Value Chain Strategy

There are many different ways to do this kind of analysis of the value chain. Analytical methods change based on what kind of competitive advantage the company wants to build, such as a cost advantage or a differentiation advantage. The explanation and general stages are as follows:

1. Competitive advantage

A competitive advantage strategy is the ability of the company to receive a profit save against the gains obtained by the competitor in the market in the same industry. Additionally, a company’s success can be measured using strategic competitiveness and high profitability. Companies with a competitive advantage can know the structural changes in the market and determine more effective marketing tactics.

2. Cost advantage

In business, strategy is how well the company can make money against the same industry’s competitors’ advantages in the same way that the company can. Strategic competitiveness and profitability can measure how well a company is doing. A company that has this advantage can see changes in the market structure and figure out more effective ways to market its products.

3. Differentiation advantage

This approach is suitable for businesses that want to make their products and services stand out in the market. Among the companies that are shown are Apple, Google, and Starbucks. The company looks at customer value creation activities, considers differentiation strategies, and establishes a long-term differentiation.

Differentiation
Sumber: axiomq.com

Conclusion

The company’s value chain analysis helps compete to be better than other companies and to be able to accomplish something that other companies cannot. As a result, the corporation must pay close attention to every action in the manufacturing chain, which is often handled by internal analysis.

You may use HashMicro’s ERP CORE Software to simplify every operation inside the firm. The program may significantly assist you in streamlining your business procedures and driving your company’s development.

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Interest in getting savvy tips for improving your business efficiency?

Vania Marsha Kristiani
Vania Marsha Kristiani
A Junior Content Writer at HashMicro who Interested in Digital and Growth. Also a life-time learner who always strive to learn and grow.

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