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2 VALUE CHAIN Porter’s definition includes all activities to design, produce, market, deliver,

and support the product/service. A value chain is a set of activities that a firm operating in a specific

industry performs in order to deliver a valuable product or service for the market.

Way of organizing the activities of a business so that each activity adds value (value added activity) or productivity to the total operation of the business.

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3 TYPES OF VALUE CHAIN

Value Chain is Categorized Based On The Type Of Organizations.

Manufacturing based.Service based.Both Manufacturing And Service Based.

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4 VALUE CHAIN ANALYSIS 

Value Chain Analysis is a useful tool for working out how you can create the greatest possible value for your customers. In business, we're paid to take raw inputs, and to "add value" to them by turning them into something of worth to other people.

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Porter’s Value Chain Model

Overview

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Introduced by Michael E. Porter in his influential book “Competitive Advantage” in 1985.

Can be used by companies to examine all of their activities in the process of converting inputs to outputs.

How value chain activities are carried out, determines costs and affects profits. The value that's created and captured by a company is the profit margin (Value Created

and Captured – Cost of Creating that Value = Margin). May 2, 2023

7Inbound Logistics.

Operations

Outbound Logistics

Marketing and Sales

Services

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Primary Activities

Involve the purchase of materials, the

processing of materials into products, and

delivery of products to customers.

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Firm’s Infrastructure : These are a company's support systems, and the functions that allow it to maintain daily operations. Accounting, legal, administrative, and general management are examples of necessary infrastructure that businesses can use to their advantage.

Human Resource Management : This is how will a company recruits, hires, trains, motivates, rewards, and retains its workers. People are a significant source of value, so businesses can create a clear advantage with good HR practices

Technology Development : These activities relate to managing and processing information, as well as protecting a company's knowledge base. Minimizing information technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation.

Procurement : This is what the company does to get the resources it needs to operate. This includes finding vendors and negotiating best prices.

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Support primary activities and can play a

role in each primary activity.

It may also support each other within support

activities.

Support Activitie

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The value chain is a very flexible strategy tool for looking at your business.

Used to analyze and create competitive advantages on both cost and difference.

Understand the organisation issues involved with the potential of making customer

value commitments and potentials

Adapted for any type of business (manufacturing, retail or service, big or small).

The deeper understanding of your strengths and weaknesses to be included in your SOWT

analysis ( you vs competitors)

Well known and has been a support plan for teaching in business schools (last 20 to 25 yrs.)May 2, 2023

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It has to be adapted to a particular business situation and that can be a

disadvantage since, to get the best from the value chain.

Many people are familiar with the value chain but few are experts in

its use.

The scale and scope of a value chain analysis can be threatening.(full

value chain is difficult)(your vs competitors)May 2, 2023

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TATA MOTORS(A Manufacturing Based Company)

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12Value Chain & Value System of

TATA Motors

Inbound Logistics

Operations Marketing ServiceOutboundLogistics

Suppliers , Contractors

SAP , VCM

SAP , CRM - DMS

Strategic Alliances

Transporters, Convoy Drivers Association

Dealer Network, Marketing Research Firms, Vehicle

Financing

Regional Warehouses, Dealer Workshops, Distributors, TASS

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13 Inbound Logistics

Long term contract with service provider’s – transporters and agents.

Personnel at regional offices for over seeing the smooth transit of goods.

Transparency and monitoring through deployment of IT – all transactions through SAP.

DTL (daily transport logistics) supplies for critical high value items.

Efficient storage facilities – easy storage and retrieval.

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14 OPERATIONS Capital Equipment Manufacturing division – tooling development

capabilities of global standard. Apprentice Trainee Course – ensuring stable source of skilled manpower. TPM(total productive management) team – continuous drive to improve

efficiencies. Automated manufacturing processes. Distributed manufacturing – Assembly units at South Africa, Thailand,

Bangladesh, Brazil etc. Maintenance – technical capability. Capacity Utilization – Mercedes Benz cars make use of Tata Motors paint

shop facilities. May 2, 2023

15OUTBOUND LOGISTICS

Stockyards, all across the country.

Long term contracts with transporter’s – higher volume of business to transporters

ensures competitive price.

Regional Sales Office and Vehicle Dispatch Section linked through SAP.

Efficient security system for prevention of any kind of pilferage.

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Marketing & Sales

Structured approach to understanding the requirements of individual customers – QFD’s conducted at regular intervals.

Clear identification of product requirements, leading to development of innovative products – Tata 207 DI, Tata Ace.

Pan India presence and global footprint. Various teams for addressing the requirements of institutional customers –

Defense, State Transport Units Quick assessment of the changing market dynamics and consumer preferences –

Tata 407 LCV Large network of dealers – use of technology (CRM-DMS). May 2, 2023

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17 Service(TASS) Easy availability of spare parts. Efficient collection of data from field and

communication to the respective plants. Pan India presence, as well as global presence. Large network of workshops – Dealer workshops and

TASS. Training facilities – for dealer end and TASS personnel.

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SUPPORT ACTIVITIES

19Procurement

E procurement initiative. Global Sourcing Team – China like tires, power steering units etc.,

Steel procured from Belarus. Long term relationships with a stable and loyal pool of suppliers. Technology driven procurement – SAP. Group resources – Tata Steel and Tata International . Localized supplier base at mfg. locations – low inventory levels.

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Technology Development Approximately 2% of the annual profits of the company invested in

(R&D). Knowledge portal – helps employees keep up-to-date with the latest

technologies. Extensive prototype building and testing facilities. Strategic

partnerships – MDI (France), Fiat etc. Formal benchmarking process. “Technology Day” organized across all plant locations.

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Human Resource

Vast pool of technically competent engineers and managers.

Focus on development of technical capabilities – Technical Training Center’s, Alliance with technical Institutes.

Focus on development of managerial skills – MTC’s , TMTC

Career improvement schemes – FTSS . May 2, 2023

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22 Firm Infrastructure Multi – Location facilities. Strong leadership – under the support of Tata Sons. Best in class prototype building facilities. Technology – SAP. Large product portfolio.

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