With such a large number of companies and businesses operating globally today, competition has become much more fierce and challenging than at any other time. However, this is not an obstacle for not starting and building new businesses that seek a place within the consumption needs of the world population.
In this regard, one of the most important concepts that must be managed to carry out any business-type project is what is known as the Value chain.
What is the value chain?
The value chain consists of a strategic tool that is used to study the various activities carried out and carried out by a certain business organizationl, this in order that its sources of competitive advantage can be detected and in this way, to be able to generate a certain value to the final product.
In this way, we can find that the A company's value chain is made up of all its activities generated that entail added value.or, as well as by the margins that these activities can contribute. In summary, the value chain is made up of the strategic activities that seek to increase the value and competitive advantage of a business organization.
How does the value chain operate within the operation of a company?
The value that is generated as a result of business activities works as follows: In the case of manufacturing industries, they generate value when they transform raw materials into products of necessity for the population.
Of course, the added value is already found in the final manufactured product, since unprocessed raw materials do not serve people for their daily consumption.
For this reason, a retail retail company offers a large number of products that contain a high added value as they are already processed, a value that increases by providing all these items to the customer in one place, a space that has been provided by the establishment of sale so that people can acquire everything they need, which entails an additional cost that is also an added value to the final product, and for which the client will end up paying in order to continue obtaining their basic consumption needs, through articles already processed and in a single sale site.
How is the competitive advantage of one company generated over another?
The competitive advantage of one company in relation to another is generated when one manages to increase its margin, which can be achieved either by lowering costs, or also by increasing sales. The margin is what is known as the difference that is generated between the total value and the collective cost of performing and carrying out activities of value for a business organization.
Value activities
To carry out its function, The value chain has fundamental support activities, which can be divided into two main parts: primary activities and secondary activities. Next, we are going to observe the main characteristics that each of these strategic methods gathers that increase the competitive advantage, and as such, the added value of a company.
Primary activities
The primary activities are constituted from the methods of physical creation of the products, as well as their sales process and the after-sales service that such operation entails.. It is worth mentioning that these, in turn, can be differentiated into sub-activities. Mainly, within the value chain model, five types of primary activities can be clearly differentiated, which are the following:
- Internal logistics: It is the set of operations for the reception, storage and distribution of raw materials, which is very important to ensure that no setbacks or eventualities of any kind are generated that affect the production or distribution line of any commercial entity.
- Operations: Once the required raw materials are available, this activity refers to the processing capacity of these elements in order to transform them into the final product. Therefore, it is a fundamental step to ensure the production that the commercial entity will have.
- External logistics: If internal logistics refers to the maneuvers to ensure the possession and assortment of raw materials with which the final product has been produced, external logistics, on the other hand, has to do with this same methodology, but applied to external processes, that is, when the product leaves the production center and is delivered either to wholesalers, distributors or even to end consumers.
- Marketing and sales: This activity, as its name could indicate, is essential for the product to be made known to the consumer population.
- Service: This activity can be associated both with after-sales service and with everything related to information and maintenance that may include the purchase of a product. It is about ensuring the loyalty of customers by providing them with a product that already in their hands includes certain important guarantees, such as ensuring the return in case of damage or imperfections, or the provision of advice against any eventuality such as failure in delivery or support for install the product, etc. All these guarantees are intended to maintain and enhance the final value of the product, thereby substantially preserving the level of consumer satisfaction.
Supporting or secondary activities
It is important to remember that in order for the primary activities to be carried out efficiently and smoothly, they are in turn supported by the so-called secondary activities of the value chain. These processes are carried out as follows:
- Organization infrastructure: It is made up of all those activities that provide sustainability and that maintain the basic operation of any company, that is, activities such as planning, accounting, administration and finances.
- Human resources management: As its name indicates, this support activity has to do with the maintenance and conservation of personnel, that is, it consists of the search, hiring and motivation of the staff of workers who work in the company. It is important to take this element into account, since the human resources of a company are one of its most fundamental structures and that can define its long-term success.
- Technology development, research and development: For every company to continue operating with the greatest efficiency and providing the best and most innovative products to all its customers, technological development is vital to stay at the forefront within the range of products and / or services it offers, which in Ultimately, they will always give you a quality image with which you can always differentiate yourself from your competitors.
- Purchases: This factor has to do with the ability to generate the most efficient and useful purchases for the company. In essence, it is about how to manage the processes of purchasing machinery, components, advertising for the promotion of the company or services that are used to maintain the morale of its workers, as well as its optimal functioning.
Tips to successfully apply the value chain
Consejo 1: Since the value chain of a business organization must reflect the implemented strategies of the business, when deciding how to improve said value chain, it must be clear about the positive characteristics that differentiate it from competitors, or on the other hand, you can promote a lower cost structure.
Consejo 2: When you are faced with a large list of changes to implement for the modernization of the company, it is very important to prioritize and focus on those changes that are the ones that will most positively impact the customer.
Consejo 3: It is recommended to delve into each of the elements that make up the value chain in detail, both in determining their primary activities and in support activities. In this way, you can find elements that can work poorly and that have a wide potential for improvement, which will ultimately end up increasing the competitive advantage of the entire company.
Consejo 4: The value chain is determined primarily according to an internal analysis of the company, for which it is recommended, for greater efficiency, to carry out studies on external circumstances that may influence the value and competitive advantage of the business.
Conclusion
As seen in this article, knowledge of the value chain can be really useful to considerably increase the added value and competitive advantage of a business organization. Taking this data into account, better decisions can be made to carry out any initiative aimed not only at the establishment, but also at the preservation and development of any type of business or company. For this reason, it is so important to understand and effectively apply the value chain in all business-type initiatives, as it will be the basis through which the solidity of our company or business will be sustained.