PPT Value Chain Analysis - Cost Accounting - B Com PDF Download

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VALUE CHAIN ANALYSIS :
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VALUE CHAIN ANALYSIS :
VALUE
? THE VALUE IS THE TOTAL AMOUNT (i.e. TOTAL 
REVENUE) THAT BUYERS ARE WILLING TO PAY 
FOR A FIRM’S PRODUCTS. 
? THE DIFFERENCE BETWEEN THE TOTAL VALUE 
(OR REVENUE) AND THE TOTAL COST OF 
PERFORMING ALL OF THE FIRM’S ACTIVITIES 
PROVIDES THE MARGIN .
? THE VALUE CHAIN IS A TOOL DEVELOPED BY DR. 
MICHAEL PORTER(HARVARD BUSINESS SCHOOL)
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VALUE CHAIN ANALYSIS :
VALUE
? THE VALUE IS THE TOTAL AMOUNT (i.e. TOTAL 
REVENUE) THAT BUYERS ARE WILLING TO PAY 
FOR A FIRM’S PRODUCTS. 
? THE DIFFERENCE BETWEEN THE TOTAL VALUE 
(OR REVENUE) AND THE TOTAL COST OF 
PERFORMING ALL OF THE FIRM’S ACTIVITIES 
PROVIDES THE MARGIN .
? THE VALUE CHAIN IS A TOOL DEVELOPED BY DR. 
MICHAEL PORTER(HARVARD BUSINESS SCHOOL)
What is the value chain?
? Porter’s definition includes all activities to 
design, produce, market, deliver, and support the 
product/service.
? The value chain is concentrating on the activities 
starting with raw materials till the conversion into 
final goods or services.
? Two categories:
?Primary Activities (operations, distribution, sales)
?Support Activities (R&D, Human Resources)
Page 4


VALUE CHAIN ANALYSIS :
VALUE
? THE VALUE IS THE TOTAL AMOUNT (i.e. TOTAL 
REVENUE) THAT BUYERS ARE WILLING TO PAY 
FOR A FIRM’S PRODUCTS. 
? THE DIFFERENCE BETWEEN THE TOTAL VALUE 
(OR REVENUE) AND THE TOTAL COST OF 
PERFORMING ALL OF THE FIRM’S ACTIVITIES 
PROVIDES THE MARGIN .
? THE VALUE CHAIN IS A TOOL DEVELOPED BY DR. 
MICHAEL PORTER(HARVARD BUSINESS SCHOOL)
What is the value chain?
? Porter’s definition includes all activities to 
design, produce, market, deliver, and support the 
product/service.
? The value chain is concentrating on the activities 
starting with raw materials till the conversion into 
final goods or services.
? Two categories:
?Primary Activities (operations, distribution, sales)
?Support Activities (R&D, Human Resources)
TYPES OF VALUE CHAIN:
• Value Chain is categorized into types based on 
the type of organizations.
• Manufacturing based.
• Service based.
• Both manufacturing and service based.
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VALUE CHAIN ANALYSIS :
VALUE
? THE VALUE IS THE TOTAL AMOUNT (i.e. TOTAL 
REVENUE) THAT BUYERS ARE WILLING TO PAY 
FOR A FIRM’S PRODUCTS. 
? THE DIFFERENCE BETWEEN THE TOTAL VALUE 
(OR REVENUE) AND THE TOTAL COST OF 
PERFORMING ALL OF THE FIRM’S ACTIVITIES 
PROVIDES THE MARGIN .
? THE VALUE CHAIN IS A TOOL DEVELOPED BY DR. 
MICHAEL PORTER(HARVARD BUSINESS SCHOOL)
What is the value chain?
? Porter’s definition includes all activities to 
design, produce, market, deliver, and support the 
product/service.
? The value chain is concentrating on the activities 
starting with raw materials till the conversion into 
final goods or services.
? Two categories:
?Primary Activities (operations, distribution, sales)
?Support Activities (R&D, Human Resources)
TYPES OF VALUE CHAIN:
• Value Chain is categorized into types based on 
the type of organizations.
• Manufacturing based.
• Service based.
• Both manufacturing and service based.
What is value chain analysis?
• Used to identify sources of competitive advantage 
• Specifically:
– Opportunities to secure cost advantages
– Opportunities to create product/service 
differentiation
• Includes the value-creating activities of all industry 
participants