1.

A companys value chain is a part of larger stream of activities

called as value system. The value system consists of value
chain of suppliers, value chain of the company (the product it
produces, the distributors value chain and linkages that
connect activities in all value chains). Elaborate on this with
examples.
A. Today Value chain analysis has become a hot topic for all the
manufacturing organizations. Organizations have begun to
realize the fact No matter how great the business strategy, if
the operations function cant meet the mark, its game over.
The focus of the organizations has now shifted from just
having a business strategy to integration of the business
strategy with supply chain initiatives to drive operational
excellence. For this organizations are focusing on developing
resources which have deep industry experience encompasses
in new product development, inventory strategy and
integrated demand planning, sourcing and commodity
management,
manufacturing
footprint
strategy
and
operations, distribution network and logistics optimization,
and sustainability. It is believed that unless and until these
factors are met, the full potential of the organizations
resources cannot be met. Organizations are now focusing on
either having a consultant to guide them in the entire process
or they themselves look forward to employing programmatic
approaches, leverage analytics capabilities, and offer
managed services that can help improve top-line growth,
lower costs, reduce response times and increase productivity.
Today the industry value chain starts with the value-creating
processes of suppliers, who provide the basic raw materials
and components. It continues with the value-creating
processes of different classes of buyers or end-use consumers,
and culminates in the disposal and recycling of materials.
Value Chain Analysis is done in basically three parts
1. Industry Structure analysis
2. Core Competency Analysis
3. Segmentation Analysis
Industry structure analysis looks into the suppliers and buyers
bargaining powers, efficiencies and contributions. The industry
analysis also looks into the competition from substitutes, new
entrants and also looks into the intensity of the competition.
Core Competency looks at leveraging of the internal resources
as a differentiating factor. It also looks at how much the

customer value is enhanced and whether the competency can

be enhanced.
Industries are sometimes collections of different market
segments. Vertically integrated industries are good examples
of a string of natural businesses from the source of raw
material to the end use by the final consumer. Several firms in
the paper and steel industries are vertically integrated. Not all
firms in an industry participate in all segments. This basically
involves 5 steps
1.
2.
3.
4.
5.

Identify segmentation variables and categories

Construct a segmentation matrix
Analyze segment attractiveness
Identify key success factors for each segment
Analyze attractiveness of broad versus narrow segment
scope.

Example
In childrens toy industry, small companies purchase ideas for
new products from independent inventors and entertainment
companies. They hire outside help to design products. They
contract manufacturing and packaging from factories in Asia.
The finished products are then distributed to retailers in major
worldwide markets.