VALUE CHAIN ANALYSIS

INTRODUCTION:
Value Chain Analysis looks at the activities that go to make up a product or service with a
view to ascertaining how much value each activity adds. It was devised by Porter as a
technique to help an organization assess its internal resources. The value or margin of a
product is calculated by the amount of revenue it earns, in this case total revenue, which is
calculated by the price of the product (or service) multiplied by the quantity consumed.
Further, by reducing the total cost of each product from the total revenue, we can calculate
the profit margin for the organization. Thus, the greater the difference between the
organization’s revenue and its costs, the greater the value it is adding.
So if we want to increase the value an organization adds for the consumers of its products,
first we have to ascertain where this occurs and how much value each activity adds. Similarly
we need to know how an organization might enhance this value added further by
reconfiguring parts (or all) of the value-added process. However, it is increasingly recognized
that organizations can also add value through cooperation with their suppliers, customers and
distributors. This entire process is referred as the VALUE CHAIN system and recognizes
that an organization’s own value chain will interact with the value chain prevalent in other
organization.
Porter's value chain model is popular in the business world. Value chain analysis is a
strategy tool used to analyse internal firm activities. Its goal is to recognize, which activities
are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and
which ones could be improved to provide competitive advantage. Here is the list of primary
value chain activities as proposed by Porter:

1. Primary Activities
The primary value chain activities of ICICI Bank Limited are directly involved in producing
and selling the product to targeted customers. Analysis of primary value chain activities can
improve the performance of ICICI Bank Limited as explained below.
1.1 Inbound Logistics
These activities cover receiving, storing, and distributing inputs to the products. They include
material handling, warehousing, inventory control, vehicle scheduling, and returns to
suppliers. Thus it is important to develop strong relationships with suppliers as their support
is necessary to receive, store and distribute the product. Without analysing the in-bound
logistics, ICICI Bank Limited can face various challenges in product development phases.
Analysis of in-bound logistics requires a company to focus on every aspect of transformation
from raw material to finished product. Some examples of inbound logistics are retrieving raw
material, storing the inputs and internally distributing the raw material and components to
start production.
1.2 Operations
These activities deal with transforming an organization’s inputs into final products such as
machining, packaging, assembly, testing, printing and facility operation.
The importance of analysing operational activities raises when raw material arrives, and
ICICI Bank Limited is ready to process the raw material into the end product and launch it in
the market. Some examples of operational activities are machining, packing, assembling and
testing. Equipment repair and maintenance also falls into this category..

1.3 Outbound Logistics

These activities are associated with collecting, storing, and distributing the product or service
to buyers. Outbound logistics include warehousing, material handling, delivery, order
processing, and scheduling.
Outbound logistics include the activities that deliver the product to the customer by passing
through different intermediaries. Some outbound logistics activities are material handling,
warehousing, scheduling, and order processing, transporting and delivering to the destination.
ICICI Bank Limited can analyse and optimise the outbound logistics to explore competitive
advantage sources and achieve its business growth objectives.
1.4 Marketing and Sales
This includes activities that make a product available for buyers to purchase and induces
them to buy. It includes advertising, promotion, sales force, quoting, channel selection,
channel relations, and pricing.
Some examples of ICICI Bank Limited's marketing and sales activities are- sales force,
advertising, promotional activities, pricing, channel selection, quoting and building relations
with channel
1.5 Services
These activities enhance or maintain the value of products, such as installation, repair,
training, parts supply, and product adjustment. The pre-sale and post-sale services offered by
the ICICI Bank Limited will play an important role in developing customer loyalty. The
modern customers consider post-sale services as important as marketing and promotional
activities. The power of negative e-WOM due to poor support service cannot be undermined
in the current technologically advanced era. The company must analyse its support activities
to avoid damaging brand reputation, and instead use it as a tool to spread positive word of
mouth due to quick, timely and efficient support services.

2. Support Activities
The support activities play an important role in coordinating and facilitating the primary
value chain activities. These activities are there to ensure that the primary activities are
carried out efficiently and effectively. The four generic support activities are procurement,
technology development, human resource management and firm infrastructure. The first
three support activities may be associated with specific primary activities, while firm
infrastructure supports the entire value chain. ICICI Bank Limited can also benefit from
analysis of its support activities as explained below.
2.1 Firm infrastructure
The firm infrastructure denotes a range of activities, such as- quality management, legal
matters handling, accounting, financing, planning and strategic management. Effective
infrastructure management can allow ICICI Bank Limited to optimise the value of the whole
value chain. ICICI Bank Limited can control the infrastructure activities (or commonly called
overhead costs) to strengthen the competitive positioning in the market.
2.2 Human resource management
ICICI Bank Limited can analyse human resource management by evaluating different HR
aspects, including- recruiting, selecting, training, rewarding, performance management and
other personnel management activities. The effective HR management can allow ICICI Bank
Limited to reduce competitive pressure based on motivation, commitment and skills of its
workforce. The company can also achieve its cost minimisation objectives by analysing
hiring and training costs with their relative return. The heavy dependence of ICICI Bank
Limited on employees' talent will increase the importance of this value chain support activity.
2.3 Technology development
In a modern, technological advanced era, almost all value chain activities depend on
technological support. The technological integration in production, distribution, marketing
and human resource activities requires ICICI Bank Limited to realise the importance of
technology development. It can be divided into product and process technological
development activities. Some examples are- automation software, technology-supported
customer service, and product design research and data analytics. The research and
development department of ICICI Bank Limited is classified in this category.
2.4 Procurement
The procurement in value chain denotes the processes involved in purchasing the inputs that
may range from equipment, machinery, raw material, supplies, raw material and other items
necessary for producing the finished product. Due to its linkage with multiple value chain
activities, ICICI Bank Limited should carefully consider its procurement activities to
optimise the inbound, operational and outbound value chain.

Customer database OUTBOUND MARKETING

OPERATIONS SERVICES
Technology LOGISTICS & SALES
High skilled human Faster run around High quality Knowledge Banking Phoone Banking
capital time customer High focus on SMS and E-Mail
Extensive network Dedicated trade relationship advertising(only online banking
of retail/ corporate desk for handling management 17.42% of total platforms
branches, online trade transcation Customized expenses v/s 1.82% customer care 24*7
banking and ATMs Specialized advisory products suite sold for HDFC bank
to facilitate team for catering to through sales
deposits and loans SME managers
Credit monitoring Disciplined Credit
for advances Risk Management
 FIRM Mobile Payment platform, Two-Factor authentication,
RFID, Mobile Banking, Internet Banking, Biometric
INFRASTRUCTURE Authorization, and Speech enabled IVR

Performance management Process, Training and

HUMAN RESOURCES Development programs, Performance Linked plan
Employee stock option

MPLS Technology, SOA, P2P Payment solution, Risk

TECHNOLOGY Intelligence Management system, outsourcing, ATMs,
Mobile Banking, phone Banking, SMAC, Six sigma norms