SADHU VASWANI INSTITUTE OF

MANAGEMNET STUDIES FOR GIRLS, PUNE

NAME: Mariya Iqbal Pithawala

ROLL NO.: 18114
CLASS: MBA PART II
SUBJECT: 301, Strategic Management
SUBJECT TEACHER: Mr. Kishore Sidhwani
Assignment 2
DATE OF SUBMISSION: 16th September 2019.
 1. Explain Porter’s Value Chain using example of any business or enterprise.
Ans: -
Introduction:
Porter introduced the concept of value chain analysis. It is the method which evaluates the
capabilities and resources of the company and determines its strengths and weaknesses. Value
chain analysis also helps to find out the activities which provide value addition to a product or
service. The value of a product or service can be easily determined by the revenue it has earned.
In case, if the total cost of a given product is available, then the profit margin can be calculated by
calculating the margin between the total revenue generated and total cost incurred. Hence, it can
be deferred that the higher difference between the organization’s revenue and its costs, the higher
is the value added.

Figure: Porter’s Value Chain

Porter’s Value Chain using example of Dell
I. PRIMARY ACTIVITIES:

1. Inbound Logistics:
These are all processes that are involved in the receiving, storing, and internal distribution of the
raw materials or basic ingredients of a product or service. The relationship with the suppliers is
essential to the creation of value in this matter.
Example: Dell Inc. has adopted Just-in-the-nick-of-time, for inbound logistics. The parts needed
to assemble a PC are delivered by suppliers every couple of hours and double-decker conveyor
belts serve each assembly point. They are aiming to reduce the inventory turnover time; the reason
for this is the rapid advancements taking place in the computer components field. Their success in
this matter can be proved with the fact that in 1998 their inventory turnover was seven days
whereas the inventory turnover of the industry leader at that time, Compaq, was twenty-three days.
2. Operations:
These activities convert inputs into final product, which involves activities like machining,
assembling, packaging, equipment, maintenance, testing and facility operation, etc.
Example: Until 97’ each worker performed a particular task in the assembly lines. However, after
reorganization Dell shifted to “Cell Manufacturing” where a team of workers assembled the entire
PC to consumer specification, then it was also dropped in favor of more improved assembly line.
As consumer specifications vary for only some components, the company’s latest innovation is to
pre-assemble a mixture of configurations that are commonly ordered.
3. Outbound logistics:
These are all activities that are related to delivering the products and services to the customer.
These include, for instance, storage, distribution (systems) and transport. They may be internal or
external to your organization.
Example: After assembling, the PC’s are transferred to the shipping department, where they are
packed and shipped. The delivery of these PC’s takes three to five business days. The major output
of the company is built to customer orders having a small inventory being produced to cater to the
needs of retailers and whole sellers.
4. Marketing and Sales:
These are all processes related to putting the products and services in the markets including
managing and generating customer relationships. The guiding principles are setting oneself apart
from the competition and creating advantages for the customer.
Example: Dell sales are a mix of sell-direct-to-customer strategy and selling through retailers.
They sell their products through their website, toll free lines and in case of corporate clients, etc.…
When the sell-direct-to-customer strategy failed they installed Kiosks in some electronic stores for
the customer to physically check the product and then place an order. Unlike other manufactures
Dell Inc.’s marketing efforts are focused towards the end users. Advertising is a major emphasis
in the company; their strategy includes TV promotion, magazine ads, online promotion etc.….
5. After Sales Service:
This includes all activities that maintain the value of the products or service to customers as soon
as a relationship has developed based on the procurement of services and products. It includes all
the activities required to keep the product or service working effectively for the buyer after it is
sold and delivered.
Example: The company has a lot of initiatives to provide after sale service and support to their
customers. Some of these initiatives are premier pages, product design services, value-added
services for customers and after sale services, etc.…
II. SECONDARY ACTIVITIES:

1. Firms Infrastructure:
This concerns the support activities within the organization that enable the organization to maintain
its daily operations. Line management, administrative handling, financial management are
examples of activities that create value for the organization. Accounting, legal, administrative, and
general management are examples of necessary infrastructure that businesses can use to their
advantage.

Example: Dell Inc. has formed alliances with local service providers to provide on-site services to
their customers. They have also formed strategic alliance with Lexmark to make printers and
cartridges under the Dell label.
2. Human Resource Management:
This includes the support activities in which the development of the workforce within an
organization is the key element. Examples of activities are recruiting staff, training and coaching
of staff and compensating and retaining staff.
Example: As of early 2019, Dell's employee count was 157 thousand. The majority, approximately
145 thousand, of these employees are full-time employees. 37 percent of Dell's full-time
employees are located in the company's home market, the United States.
3. Technology Development:
These activities relate to the development of the products and services of the organization, both
internally and externally. Examples are IT, technological innovations and improvements and the
development of new products based on new technologies. These activities create value using
innovation and optimization.
Example: Dell Inc.’s R&D group employed four thousand engineers and had a budget of six
hundred million dollars in 2008. They have high standards of quality control in it plants. They
have various tests and quality control process to check the quality of parts, components, and
finished products.
4. Procurement:
These are all the support activities related to procurement to service the customer from the
organization. Examples of activities are entering into and managing relationships with suppliers,
negotiating to arrive at the best prices, making product purchase agreements with suppliers and
outsourcing agreements. Organizations use primary and support activities as building blocks to
create valuable products, services and distinctiveness.
Example: They work very closely with their suppliers to maintain the quality of their components.
Their long term relationship with their suppliers has brought them some advantages, such as, the
supply of enhanced quality components, the timely delivery of components, suppliers’ engineers
are stationed at the company’s plants for development and launch of new products and also adapt
new ways to reduce costs out of the supply chain.