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The concept of value chain have been described and introduced by the famous personality Michael porter in the year 1985 where he talks about certain terms:

1. Inbound logistics

2. Operations

3. Outbound logistics

4. Marketing & sales

5. Service

These above activities are supported by these manpower and sources:

1. Firm infrastructure

2. Human resource management

3. Technology development

4. Procurement

The primary activities that offers a customer with the cost of the activities and with the profit margin from that activities which are described below:

Inbound logistics: It involves the with the relationship between the supplier and the firm which has the activities of supplies of raw materials, the receiving, delivering and storing as well keeping the raw materials safe. The distribution to manufacturing of these raw materials is also concerned.

Operations: In this type of activity, the process and the steps of transformation of goods and services means to transform inputs into outputs that is product and services.

Outbound logistics: It includes most of the activities from collection to distribution. First it requires the activity of collection, then it needs to store the warehouse and the final stage is to distribute those products.

Marketing and sales: These includes the needs and requirements of the customer, the identification of the customer needs and demand so they can generate sales. These activities included to inform the buyer about the products or services to make them aware of the product or services. They create the customer needs and facilitate them for the purchase of that product.

Service: It is the next step after the purchase and it is given to the customer after giving them the delivery of the product. This is basically to solve the queries and problems of the customer which requires giving them to the customer after their purchase and they should not feel bad about your product or brand or your company so the service is needed when there is selling and the selling is incomplete without services.

The secondary activities which includes:

Infrastructure: it consists of various department and function in the company like accounting, financing, planning, public affairs, quality management, general management, public affairs, government relations and many more. It serves the company’s needs and controls the system culture of the company and also the structure of an organization. It helps in the various parts and the departments of the company.

Human resource management: It is the main part of the organization because it helps in recruiting, hiring, controlling the costs of the company, it decides about the training and development part in the company to their employees and also helps in deciding the compensation of the employees. A good management always tries to enhance the skills of its employees by the help of co-ordination, proper training, developing their ideas and thoughts and managing them well. They reward him at the time of better performance with high awards, certificates, recognition like bonus, incentives, extra pay, and promotion as per performance. When an HR always appreciates the good work and provides the reward and recognition which motivate the employees and also speak about the respect of others. It always believes in motivating its people because the environment becomes energetic and people feel refresh in work and the culture also become well.

Technology development: it is related with the software and the hardware requirements in the company. The advancement of technological innovations and the knowledge of the new technology and development which creates support and adds value to the organization for the achievement of the organization’s goals. The innovation of new technologies, the advancement of new inventories and machines helps the organization to achieve their goals and profits.

Procurement: The materials which are purchased for the company’s inputs such as equipments, materials, resources for the firm or an organization.

The margin and the profit of the organization is depends on the usefulness of these activities effectively so that the customer feel that they are able to pay the cost for the product in the value chain. The value chain is very much useful in defining the core competence of the firm and the competitive advantage as well.

Cost advantage is defined by understanding the cost activities properly in the value chain. It determines the economies of scale; learning’s from the organization, the right use of resources and the maximum utilization of resources as well the capacity, the timings, the market timings, the rules and regulations, policies of the firm, the cost of differentiation, the geographic location, the factors such as taxes, union activity etc.

Value chain increases the uniqueness and also the differentiation of the product. The business functions such as research and marketing, design of the product and services, production, manufacturing, sales & marketing, distribution, customer service and many more which helps in the value chain function.