Page 93 - DMGT550_RETAIL_MANAGEMENT

Retail Management

Notes 3. Operations are those activities which convert resource inputs into a final product.
4. Outbound logistics are those activities relating to storing the product and its distribution
to customers.

5. Marketing and sales are those activities that relate to informing customers about the
product, persuading them to buy it, and enabling them to do so.
6. After sales services: For many companies, there are activities such as installing, repairing
products, providing spares etc.
Support activities are those which provide purchased inputs, human resources, technology and
infrastructural functions to support primary activities. Support activities include:
1. Procurement refers to those activities which acquire the resource inputs to the primary
activities.

2. Technology development: These activities are related to both product design and to
improving process and/or resource utilization.
3. Human resource management is the activities of recruiting training and rewarding people.

4. Firm infrastructure: The systems of planning, finance etc. are activities which Porter believes
are crucially important to an organisation’s strategic capability in all primary activities.
5. Furthermore, in addition to the categories, described above, Porter identifies three other
ways of categorizing activities.
6. Direct activities are concerned with the adding value to inputs.
7. Indirect activities enable direct activities to be performed e.g. maintenance.

8. Quality assurance: This type of activity monitors the quality of other activities and includes
inspection review and audit.
Linkages connect the interdependent elements of the value chain together. They occur when one
element of the value chain affects the cost or effectiveness of another.
The value chain contains an element of margin. This is the excess of the amount that the customer
is prepared to pay over the costs of the resource inputs and value activities. Firms can gain
competitive advantage by conceiving of new ways to conduct activities, employing new
procedures, implementing new technologies, or using different inputs and by exploiting linkage
effectively.

!
Caution A company’s value chain is not bounded by a company’s border. It is connected to
what Porter describes as a value system.

As well as managing its own value chain, a firm can secure competitive advantage by managing
the linkage with its suppliers and customers. A company can create competitive advantage by
making best use of these links and this means considering the value chain of these suppliers and
customers.
The value chain is also a useful model for analyzing a firm’s competitive and also further on in
the planning process for designing strategies. A firm’s value chain is not always easy to identify
nor are the linkages between the different elements. However, it is an important analytical tool
because it helps people:
1. To see the retail business as a whole
2. To identify potential sources of competitive advantage.

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