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What Is Value Chain Analysis? What Does A Firm Gain When It Successfully Uses This Tool?

1727 words - 7 pages

Developed by Michael Porter , Value Chain Analysis is an analytical framework that is used to analyse relationships between various parts of operations and the manner in which each part adds value to contribute to the level of revenues.
Value Chain Analysis the business activities are divided into two categories: primary activities and support activities. The primary activities directly deal with the creation of products or services, whereas, support activities can be used to obtain or increase competitive edge in the marketplace.
Primary activities:
Inbound logistics; Operations; Outbound logistics; Marketing and sales; Service.
Support activities:
Infrastructure activities; ...view middle of the document...

However, occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores.

Service. Providing superior level of customer services is one of the Pacific Coffee’s main objectives and it is driven from the mission statement of the company. Accordingly, the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction.
Assignment 1 Lu Janet Tao S05001741

Part A

Support activities:

Infrastructure . Pacific Coffee infrastructure includes a range of general support activities such as “ management, planning, finance, accounting, legal support and government relations that are required to support the work of the entire value-chain”.

Human Resource Management. The workforce is duly perceived to be the most valuable resource by Pacific Coffee. Pacific Coffee takes care to train and develop managers and staff to the highest levels. Success in implementing the bottom-to-top training programs has proven invaluable to achieving customer service excellence and ultimate customer satisfaction.

Technology development. Pacific Coffee relies on technology for cost-saving purposes, as well as , ensuring the consistency of the quality of products and offering a high level of customer experience in general. For instance, with the introduction of computerized coffee roasters the consistent taste of Pacific Coffee was ensured and this has contributed to the level of customer retention for the company.

Procurement. This involves purchasing items that are needed for the production of final products or offering services. For Pacific Coffee it would be coffee beans and raw food items, as well as fixed assets such as buildings, machinery etc.

Part A
a) Cost Leadership Strategy
A firm chooses a cost leadership business strategy focuses on gaining advantages by reducing its costs to below those of all its competitors. This does not mean that this firm abandons other business or corporate strategies.

Cost Leadership and Five Forces Mode

Assignment 1 Lu Janet Tao S05001741

A. Cost Leadership and the Threat of Entry
1) It helps to reduce the threat of new entrants by creating cost barriers to entry
2) New entrants may have to invest heavily to reduce their costs prior to entry
3) New entrants will enter using another business strategy rather than attempting to compete on cost.
B. Cost Leadership and the Threat of Rivalry
The threat of rivalry is reduced through pricing strategies that low-cost firms can engage in and through their relation impact on the performance of a low-cost firm and its higher-cost rivals.
C. Cost Leadership and the Threat of Substitutes
High-cost firms may have to charge high prices to cover their costs, thus making substitutes more attractive , cost leaders can keep their price low and still earn normal or above-normal economic...

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