Porter's value chain is important in P3 as question may ask you to analyse the company using value chain. It is also important in P5 as we desire to add value to the products/services in order to achieve improved performance.
Value chain is the sequence of value activities. Value activities are those that add value to the products/services. There are primary and secondary activities.
Primary activities
The goal of these activities is to create value that exceeds the cost of providing the product/service, thus generating profit margin.
1. Inbound logistics - activities that are involved in bringing the inputs to operations. For example, transportation, warehousing etc.
2. Operations - activities that are involved in transforming the inputs to outputs. For example, manufacturing.
3. Outbound logistics - activities that are involved in getting the outputs to customers. For example, transportation, packaging, storage etc.
4. Marketing and sales - activities that are involved in getting the customers to buy the product/service. For example, advertising, promotion etc.
5. Service - activities that are involved after the sales to maintain and enhance product/service value. For example, upgrading, repairing etc.
Support activities
These don't add value, but they facilitate primary activities.
1. Procurement - acquiring inputs.
2. Technology development - activities such as research and development, process automation etc.
3. Human resource management - activities associated with recruiting, training, developing and rewarding people.
4. Firm infrastructure - this includes the rest of the activities such as general management, finance, legal, accounting etc.
There may be linkages between activities and this happens when the performance or cost of one activity affects that of another. Competitive advantage may be obtained by optimising and coordinating linked activities.
Exam
In P3, you may need to identify the activities that the company is currently performing and analyse whether they add value or not. In P5, it could be more of discussion together with business integration as you know that linking the activities effectively can create value. Question in P5 can also ask you about the amendments that can be made to the value chain to deliver improved business performance. You should read the questions very carefully.
Thursday, February 9, 2012
Results for December 2011 sitting
Results for December 2011 sitting will be available to view at 13rd of February 2012, 0500 GMT. Take note that there is a difference between GMT and BST as last sitting it was stated 0500 BST. You can view your results by going to myacca or https://www.acca-business.org/results_login.html . Email or SMS from ACCA is expected to be late so it is suggested that you use the link provided here which would be less jam compared to myacca. Good luck for your results! :)
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