CIMA P2 Syllabus A. Managing The Costs Of Creating Value - Value Chain Analysis - Notes ^{5 / 7}

Looks at the activities of a firm to see those which form a competitive strength

Area	Function	Example
Inbound Logistics	Receiving, storing and taking it to the product	Stock control, Transport, Materials handling
Operations	Transform inputs into the product or service	Packaging, machining, assembly, testing
Outbound Logistics	Collection, storage and distribution of product to customer	Warehousing, transport
Marketing and Sales	How users are made aware of product and able to purchase it	Sales admin, advertising
Service	Enhances or maintains value of the product	Installation, repair, training

These support the primary activities above..

Area	Function	Example
Procurement	Acquiring inputs into primary activities	Buying raw materials
Technology Deployment	Key technologies (including ‘know how’) for the product / process / resource	R&D, product design, process development, raw material improvements
Human Resource Management	Across all primary acts. Determines whether firm is rigid or innovative	Recruiting, training, developing and rewarding staff
Infrastructure	Structures, routines, systems (again determines rigid or innovative)	Quality control

It is rare for 1 company to do all the value activities itself. Normally specialisation occurs and the company is just a part of a wider value system

In fact much of the value is created in the supply and distribution channels

Management should look at adding more value at each stage of the value chain

Creating value for customers ultimately leads to creating value for shareholders

In your exam the model is used to provide a strategic assessment of performance

Assess each link in the chain by asking yourself the following:
- How (if any) is value added here?
- Is the value greater than those created by the competition?
- Have added value techniques failed?
  If there are no core competencies in the one area then consider outsourcing