Global Business Strategy

Table of Contents

INTRODUCTION 3

THE VALUE CHAIN 3

THE VALUE ADDING ACTIVITIES 4

THE PRIMARY ACTIVITIES 4

THE SUPPORT ACTIVITIES 5

Procurement 6

Technology Development 6

Human Resource Management (HRM) 7

Firm Infrastructure 7

INTEGRATION OF BUSINESS VALUE ADDING ACTIVITIES 8

CONCLUSION 10

REFERENCES 10

Introduction

Nowadays, companies are all under the pressure of furious competition. Especially when businesses are all want to go to world wide now. The competition is even more intensive. Because of this, so they should have their own competitive advantages to sustain an effective position in the global market place to survive in such a tough environment.

To obtain competitive advantages for better positioning result, I think the PorterÐŽ¦s generic value chain can explained this. As value chain is basis on adding value throughout the whole process of delivering a product from supplier to end user. So in this essay, I will talk about the value chain and those value adding activities and how these activities co-ordinate for better business positions.

The Value Chain

PorterÐŽ¦s generic value chain (showed in Figure 1) was created by M. E. Porter in his book, Competitive Advantage (1980). This value chain includes many different activities which create and build value in an organisation. They culminate in the total value delivered by an organisation. The organisation is split into 'primary activities' and 'support activities.'

From the value chain model, to obtain competitive advantages through the five basic business activities (i.e. inbound logistics, operations, outbound logistics, marketing and sales, and customer service), companies should try all their best through every single support activities. For example, they can be Firm infrastructure, Human Resource Management, Technology Development, and Procurement of Resources. These business activates are called ЎҐsupport activitiesÐŽ¦.

Figure 1: The Value Chain

The Value adding activities

The primary activities

Ñ"Ь Inbound Logistics is concerned with the acquisition of raw materials, equipment and people. In inbound logistics goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation. It is no good to have low quality and insufficient quantity raw material for operation (the next stage). It is also important to have the efficient equipment and enough people to increase the companyÐŽ¦s efficiency.

Ñ"Ь Operation is referring to the actual processing of the inputs (i.e. raw materials, component) u to transform them into products which be sold to the market to earn money such as manufacturing. This is where goods are manufactured or assembled. Individual operations are including room service in a hotel, packing of books, videos, or games by an online retailer. I think this is the most important but it is also the most difficult activity in the whole value chain because you are producing the product or service that you are going to sell. If your product or service is really different from other or you sell product or service which others do not have, you will definitely win. That means you have your own competitive advantages.

Ñ"Ь The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer. Outbound logistics is about the distribution of products or services to customers directly or through a dealer/distribution channel. Efficient outbound logistics can save delivering time to the company. If the company manages to deliver product or service in a short time compare to its competitors, it can again obtain competitive advantages.

Ñ"Ь Sales and marketing is including those activities to promote the sale of a product or service such as advertisement on TV, Newspapers, radio, producing glossy brochures etc. When in true customer orientated fashion, at this stage the organisation always try all their best to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.

Ñ"Ь Service refers to ЎҐafter careÐŽ¦ or maintenance and support after a product or service is bought by a customer. This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.

A companyÐŽ¦s profit margin depends on the efficiency and effectiveness of the performance of these primary activities. So the money that customer pay for it is more than the cost of delivering the product. In this case, the company will have profit margin. In other words, it is earning money. Otherwise, there is no point for a company to exist.

The Support Activities

The four support activities (i.e. procurement, Technology development, Human resource management, and Firm infrastructure) are subservient to those Primary activities. The basic goal of a firm who are doing these activities is to offer the customer a level value which exceeds the cost of these activities so that there is profit margin. The purposes of the support activates are to enable the firm to perform batter when they are carrying out its primary activities. They also help to manage, control and govern by co-ordinating all the activities of the firm. The four support activities will be talk about one by one next.

Procurement

This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. As procurement and cost are linked directly, it has significant impact on cost. In other words, in order to cut down cost, saving money in procurement would be the most straightforward and effective way. Procurement is quite a broad subject; however, the interest in this assignment is only in order control systems.

Technology

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