Value Chain Analysis - Contemporary Concepts, Cost Management Video Lecture | Cost Management - B Com

hi my name is Shawna Jorgensen and
welcome to the next installment in the
strategic management planning videos I'm
a business instructor and owner and I
want to talk today about value chain
analysis and explain a three step
process that we can use to analyze
service businesses originally the idea
of value chain analysis came from
Michael Porter and he offered this model
that includes a number of primary
activities that were primarily generated
based on a manufacturing business
inbound logistics through service and
then support activities from firm
infrastructure HR Rd and procurement
which can be considered non client
facing activity it's another way to
think of support activities and in this
case the primary activities are client
facing activities for manufacturing
business and all of these couched of
course in the development of margin or
understanding of margin or profit that
the manufacturing company makes now
instead of trying to take this model and
apply it to a different and the
numerously different service businesses
that are out there I want to take a look
at a three-step process to develop your
own value chain analysis and the
information comes from mind tools so
please do check out their additional
pages on strategic management and other
templates so in this three-step process
just like Michael Porter defined his
client facing and non client facing
categories from his study of
manufacturing businesses it's important
that you and your team come together and
do an analysis of the core activities
that add value to your customer so what
are the activities that you undertake
that help serve your customer or capture
what you do and then take a look at each
of those activities and define how they
add value to your customer finally once
you define how you
- or do add value to your customer you
evaluate each category for changes that
would provide more value or efficiency
and you plan through action planning how
to make those changes so let me show you
a diagram here that is also from mind
tools now you'll notice here in the
activity analysis you want to make sure
to have client facing and non client
facing activities before you decide
which ones are your core activities all
right so here's an example so first step
in the activity analysis the software
company decided there are three primary
activities that they would look at in
their first stage that offer value to
the customers is the order taking stage
writing the specifications and then the
scheduling write in the value analysis
stage which is this first of the two
columns each category then the team
determined what adds value to the
customer so fast answering of phones
knowledge of the situation systems
understanding accurate needs and
managing expectations for what can be
delivered and then for each category the
team summarized the highest priority
descriptors of what creates value for
that category the next stage then is
evaluation and planning so fast answer
to phones what does that mean and in
concrete terms all right right now there
wasn't one in that company so they
decide that it would be three rings and
then all the the service phones would
ring so the very next person could pick
it up and team updates on clients so
that there is a clear understanding of
each of the client situation and needs
training on systems so that is a non
client facing activity trading on client
industry again non client facing and
client briefings at the ends of the
calls
and that can depending on how it's done
be both client-facing and non
client-facing but the three rings will
vary client-facing right accurate
comprehensive description of changes in
any specifications so in order for the
specifications to be accurate
comprehensive and complete and there
needs to be training and writing and
proofreading that is a non client facing
activity in the training but it does add
value to that category all right so one
by one and you notice that the need here
to prioritize the company went through
each of the core activities and then
talked about ways to add value and how
what changes were necessary to add that
value in the planning stage smart
objective specific measurable
agreed-upon realistic and time-bound
objectives would be the next step now
it's important to notice and note that
as you are trying to figure out your end
result what adds value and what you can
change you always want to keep in mind
the benefit you're providing as a
service so you want to keep in mind not
simply mechanics of delivering your
service but that you're generating
customer confidence customer loyalty
peace of mind security somehow that
higher benefit is addressed and not
simply the features doing taxes all
right doing taxes yes that's a feature
of a tax preparation company but how are
you organizing your value based
activities to do taxes where your
customer feels confident in the result
where your customer is loyal where they
generate peace of mind and field
security these are just some benefits
that you could articulate but keep in
mind with your values that that is what
you want to generate as an outcome thank
you so much for your time I look forward
to sharing with you more about strategic
management
you