Assignment No 2

NAME KAMRAN KHAN
Assignment No 2:- Process of Value Chain in A Company
What Is a Value Chain?

A value chain is a business model that describes the full range of activities needed to
create a product or service. For companies that produce goods, a value chain
comprises the steps that involve bringing a product from conception to distribution,
and everything in between—such as procuring raw materials, manufacturing
functions, and marketing activities.
A company conducts a value-chain analysis by evaluating the detailed procedures

involved in each step of its business. The purpose of a value-chain analysis is to
increase production efficiency so that a company can deliver maximum value for the
least possible cost.
Understanding Value Chains

Because of ever-increasing competition for unbeatable prices, exceptional products,
and customer loyalty, companies must continually examine the value they create in
order to retain their competitive advantage. A value chain can help a company to
discern areas of its business that are inefficient, then implement strategies that will
optimize its procedures for maximum efficiency and profitability.
In addition to ensuring that production mechanics are seamless and efficient, it's
critical that a business keep its customers feeling confident and secure enough to
remain loyal. Value-chain analyses can help with this, too.
The overarching goal of a value chain is to deliver the most value for the least cost in
order to create a competitive advantage.
Components of a Value Chain
In his concept of a value chain, Porter splits a business's activities into two
categories, "primary" and "support," whose sample activities we list below. Specific
activities in each category will vary according to the industry.
Primary Activities
Primary activities consist of five components, and all are essential for adding value
and creating competitive advantage:
1. Inbound logistics: Functions like receiving, warehousing, and managing

inventory.
2. Operations: Procedures for converting raw materials into a finished product.
3. Outbound logistics: Activities to distribute a final product to a consumer.
4. Marketing and sales: Strategies to enhance visibility and target appropriate
customers—such as advertising, promotion, and pricing.
5. Service: Programs to maintain products and enhance the consumer
experience—like customer service, maintenance, repair, refund, and
exchange.
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Support Activities
The role of support activities is to help make the primary activities more efficient.
When you increase the efficiency of any of the four support activities, it benefits at
least one of the five primary activities. These support activities are generally denoted
as overhead costs on a company's income statement:
1. Procurement: How a company obtains raw materials.

2. Technological development: Used at a firm's research and development
(R&D) stage—like designing and developing manufacturing techniques, and
automating processes.
3. Human resources (HR) management: Hiring and retaining employees who will
fulfill the firm's business strategy; and help design, market, and sell the
product.
4. Infrastructure: Company systems; and composition of its management
team—such as planning, accounting, finance, and quality control.
KEY TAKEAWAYS
 Value chains help increase a business's efficiency so the business can deliver
the most value for the least possible cost.
 The end goal of a value chain is to create a competitive advantage for a
company.
 Value-chain theory analyzes a firm's five primary activities and four support
activities.
Examples of Value Chains

Starbucks Corporation (SBUX: NASDAQ)
Starbucks offers one of the most popular examples of a company that understands
and successfully implements the value-chain concept. There are numerous articles
about how Starbucks incorporates the value chain into its business model.
Trader Joe's (Private)

Another example is Trader Joe's grocery store, which also has received much press
about its tremendous value and competitive edge. Because the company is privately
held, however, there are many aspects of its strategy that we don't know. However,
when you enter a Trader Joe's store, you can readily observe instances of Trader
Joe's business that reflect the five primary activities of the value chain.
1. Inbound logistics: Unlike traditional supermarkets, Trader Joe's does all of its
receiving, shelving, and inventory-taking during regular store hours. Although
potentially maddening for shoppers, this system creates a ton of cost savings in
terms of employee wages alone. Moreover, the logistics of having this work take
place while customers are still shopping sends the strategic message that "we're all
in this together."
2. Operations: Here's an example of how a company could apply the value chain
creatively. In primary activity number two above, "converting raw materials into
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finished product" is cited as an "operations" activity. However, because converting
raw materials is not an aspect of the supermarket industry, we can use operations to
mean any other regular grocery store function. So, let's substitute "product
development," as that operation is critical for Trader Joe's.
The company selects its products carefully, featuring items that you generally can't
find elsewhere. Its private-label products account for at least 70 percent of its
offerings, which often have the highest profit margins, too, as Trader Joe's can
source them efficiently in volume. Another vital piece of product development for
Trader Joe's is its taste-testing and chef-partnership programs, which ensure high
quality and continuous product refinement.
3. Outbound logistics: Many supermarkets offer home delivery, but Trader Joe's
does not. Yet here, we can apply the activity of outbound logistics to mean the range
of amenities that shoppers encounter once they are inside a Trader Joe's store. The
company has thought carefully about the kind of experience it wants us to have
when we visit its stores.
Among Trader Joe's' many tactical logistics are its in-store tastings. Usually, there are
a few product tastings happening simultaneously, which create a lively atmosphere,
and often coincide with the seasons and holidays. The tasting stations feature both
new and familiar items that are prepared and served by staff.
4. Marketing and sales: Compared to its competitors, Trader Joe's barely does any
traditional marketing. However, its entire in-store experience is a form of marketing.
The company's copywriters craft product labels to appeal specifically to its customer
base. Trader Joe's' unique branding and innovative culture indicate that the company
knows its customers well—which it should, as the firm has actually chosen the type
of customers it prefers and has not deviated from that model.
Via this indirect marketing of style and image, Trader Joe's has succeeded in
differentiating itself in the marketplace, thus sharpening its competitive edge.
5. Service: Customer service is paramount for Trader Joe's. Generally, you see twice
as many employees as shoppers in their stores. Whatever work they are doing at the
moment, the friendly, knowledgeable, and articulate staff is there primarily for you.
Employees welcome shoppers' interruptions and will instantly rush to find your item
or answer your question. In addition, the company has always employed a no-
questions-asked refund program. You don't like it; you get your money back—period.

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NAME KAMRAN KHAN

Assignment No 2:- Process of Value Chain in A Company

What Is a Value Chain?

A company conducts a value-chain analysis by evaluating the detailed procedures

Understanding Value Chains

1. Inbound logistics: Functions like receiving, warehousing, and managing

1. Procurement: How a company obtains raw materials.

Examples of Value Chains

Trader Joe's (Private)

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