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Chapter 3

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York University
Administrative Studies
ADMS 4900
Kelly Thomson

Jan.30/2014 Lecture 4 Chapter 3—Analyzing the Internal Environment of the Firm Value Chain Analysis - sequential process of value creating activities - firm engages in series of activities that combine various necessary inputs to create product that is brought to the marketplace - foundation for understanding building blocks of competitive advantage - value amount buyer is willing pay for what firm is providing ~ can be measured by revenue, price and quantity is can sell ~ considered valuable when cost involved in creating product is less than value - categories of activities: 1. primary activities—inbound logistics, operations, outbound logistics, marketing and sales, service 2. support activities—procurement, technology development, human resources management, firm infrastructure ~ do not directly add value to the creation of the product but provide for and facilitate primary activities to ensure they take place efficiently and effectively - value system should include suppliers, customers and alliance partners - primary and support activities depend on the industry condition and to the extent the company is service based or manufacturing based Primary Activities (manufacturing industry) 1. inbound logistics - receiving, storing and distributing inputs to the product - material handling, warehousing, inventory control, vehicle scheduling and returns to suppliers - quality controls, design and layout of facilities, use of robotics, location of facilities 2. operations - transforming inputs into the final product - machining, packaging, assembly, testing, printing and facility operations - efficient plant designs, processes to minimize waste and down time 3. outbound logistics - collecting, storing and distributing the product/service to customers - finished goods, warehousing, material handling, delivery vehicle operation, order processing and scheduling 4. marketing and sales - firm’s efforts to gather market intelligence and understand its customers, activities associated with purchase of products/services by end users - innovative approaches to advertising and promotion, monitoring customer segment needs and trends 5. service - range of activities associated with maintaining the value of the product - installation, maintenance, support, repair, training, parts supply and product adjustment Support Activities 1. general administration - general management, planning, finance, accounting, legal and government affairs, quality management and information systems - supports entire value chain 2. human resource management - recruiting, hiring, training, development and compensation - supports both primary and support activities and entire value chain 3. technology development - parts of technology development are related to product and its features support entire value chain, other technology development are associated with specific primary or support activities 4. procurement - function of purchasing inputs to be used in the firm’s value chain - purchased inputs include raw materials, supplies, other consumable items, assets- machinery, laboratory, equipment, off equipment and building - related to purchasing inputs not the inputs themselves Resource-Based View of the Firm - resource based review (RBV) internal analysis within company and external analysis of the industry and competitive environment ~ goes beyond SWOT ~ directs managers to integrate internal and external perspectives and helps them to develop strategies that build on core competencies and enable the firm to achieve sustainable competitive advantages Types of Firm Resources - inside out strategy - assets, capabilities, organizational processes, information, knowledge, systems controlled by firm which enable it to develop and implement value creating strategies - resource accumulation is constrained and time consuming 1. tangible - easy to identify, measure and value - physical assets - value arises from their physical characteristics (ie: location) - do not create competitive advantage because easy to identify, describe, imitate 2. intangible - harder to identify and quantify, can be elusive - brand name, company reputation, knowledge, technology, pa
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