Page 25 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes The value chain is a tool developed by Michael Porter for identifying ways to create more
customer value. The value chain considers nine strategically important activities among the
various activities of a firm; they create value and cost in a specific business. These relevant
activities are divided into primary and support activities, as depicted in Figure 1.4.

Figure 1.4: The Generic Value Chain

Firm infrastructure
Margin
Human Resource Management
Support
Activities Technology Development

Procurement

Inbound Operations Outbound Marketing & Service
Logistics Logistics Sales
Margin

Primary Activities
The primary value activities represent the sequence of bringing materials into the business,
converting them into final products, shipping out the final products, marketing them and servicing
them, apart from support activities such as procurement, technology development, human resource
management and firm infrastructure, that are required for supporting the primary activities.

Primary Value Activities

Inbound logistics : material handling and warehousing.
Operations : transforming inputs into the final product.

Outbound logistics : order processing and distribution.
Marketing and sales : communication, pricing and channel management.
Service : installation, repair and parts supply.

Support Activities

The support activities are handled in certain specialized departments.
Procurement : procedures and information systems.
Technology development : improving the product and process or system.

Human resource management : hiring, training and compensation.
Firm infrastructure : general management, finance, accounting, government
relations and quality management.

Example: A Small Value Chain (Production of Electricity)

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