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Value Chains
Over the last several weeks, you learned about competitive strategies. Michael Porter suggests that marketing managers should pay close attention to value chains — a network of value-creating activities. There are five primary value-creating activities and four support activities.
The primary activities include inbound logistics, operations/manufacturing, outbound logistics, sales and marketing, and customer service. Consider a fictional example of Mike’s Bikes, an online bicycle organization in Anytown, USA. Inbound logistics involve receiving, storing, and disseminating inputs to products. Mike’s Bikes acquire bicycle parts from several manufacturers. The second primary activity in the value chain is operations and manufacturing, transforming inputs into final products. For this step, Mike’s Bikes assemble the parts from the manufacturer to produce a bike. Activity three in the value chain is outbound logistics, which includes collecting, storing, and physically distributing products to the buyers. In this phase, Mike’s Bikes ship the bicycles to their customers. The fourth primary activity includes sales and marketing, inducing buyers to purchase products and providing a means for them to purchase. Mike’s Bikes frequently uses digital marketing and social media to accomplish this task. The final primary activity is customer service, which assists customers’ in using the products. Mike’s Bikes provide 24/7 customer support.
The four supporting activities in the value chain include procurement, technology, human resources, and infrastructure. For procurement, Mike’s Bikes should manage supplier relationships. For technology, investigate new designs for bikes. Human resources need to hire and support employees. Lastly, Mike’s Bikes should manage company resources for infrastructure (Kroenke & McKinney, 2013).
According to Tim Sobierski at Harvard Business School (2020), there are three major steps involved with value chain analysis: (1) Identify all the steps or activities in the process of creating a product or deliver a service; (2) determine how what is produced or created by the company creates value for the customer in terms of quality, utility, what they need and want, and is it financially possible and profitable; and (3) analyze the steps in the company’s value chain to determine whether each step is the most efficient for achieving company goals in a competitive market.
Respond to the following:
Provide an example of a value chain similar to Mike’s Bikes.
Identify three value chain goals for your example.
