Page 124 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 6: Retail Planning and Environment

measured by the amount customers are willing to pay for its products or services above the cost Notes
of carrying out value activities. A firm is profitable if the realized value to customers exceeds the
collective cost of performing the activities. There are two points to note here:
1. Customer’s purchase value, which they measure by comparing a firm’s products and
services with similar offerings by competitors.

2. The retail business creates value by carrying its activities either more efficiently than
other retail businesses, or combined in such a way as to provide a unique product or
service.
Porter analysed the various activities of an organization into a value chain. Figure 6.1 depicts
Porter’s Value Chain model.

Figure 6.1: Porter’s Value Chain

Source: www.12manage.com
This is a model of value activities and the relationships between them.
Primary Activities are those directly related with production, sales, marketing, delivery
and services. The diagram shows five primary activities.
Inbound logistics are those activities involved with receiving, handling and storing inputs
to the production system.
Operations are those activities which convert resource inputs into a final product.
Outbound logistics are those activities relating to storing the product and its distribution
to customers.
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.

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.
Procurement refers to those activities which acquire the resource inputs to the primary
activities.

Technology development: These activities are related to both product design and to
improving process and/or resource utilization.

LOVELY PROFESSIONAL UNIVERSITY 119