Entering a new era of economy, businesses are now competing fiercely with each other on prices, products, business strategies and customers. One of the things that all businesses need to pay attention to and approach is the value chain. In this article, let's explore the benefits and models of the value chain of enterprises.
Business value chain and role
Every business has a set of activities from design, production, sales, customer service support, to warranty, and it all ties together into a chain. Value chain is understood as vertically linked activities to create and add value for customers.
The value chain is a tool to help businesses reduce costs in business
When you use this value chain and analyze it carefully, it will help the company reduce costs, optimize efforts, eliminate unnecessary fees.
Not only that, the enterprise value chain is also a popular and basic tool that allows to systematically survey all business activities, identify strengths and weaknesses, competitive advantage.
Through the above information, we can partly understand that the value chain of an enterprise is strategic activities that are related to each other, through which to understand the cost structure. , existence and potential of activities.
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How to approach the value chain of the business?
Access to basic operations
Basic activities in the value chain of an enterprise include: Inbound, outbound logistics, production, marketing and service.
- Inbound logistics of an enterprise includes activities related to receiving, inventory, and distribution of products and goods.
- Operations or production are the basic activities involved in the activities that turn inputs into final products.
- Output logistics is concerned with the collection, storage, and distribution of products to consumers such as finished goods inventory, materials management, distribution, ordering process .
- Marketing and sales: In order to increase the value chain of the business, it is necessary to try to approach activities that provide means to promote purchase demand such as advertising, promotion, sales, distribution, pricing.
- Services, businesses will maintain customer retention services such as home installation, repair, training…
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Additional activities include many activities that bring great value to the business such as:
- Procurement: Related to value chain collection activities such as purchasing raw materials, supplies, machinery…
- Technology development: Every value-creating activity has technology's contribution, from new enterprise technology to increase value chain efficiency.
Machine and technology increase the value chain for businesses
- Human resource management: Including activities related to recruitment, hiring, training…
- Infrastructure includes activities like planning, finance, accounting, legal. Unlike other complementary activities, the supporting infrastructure for the enterprise's value chain has developed strongly.
How to use value chain tools effectively?
To understand and increase the value chain of your business, try to do the following basic steps:
Step 1: Define sub-activities for the main activity
For each main activity, you need to define a sequence of sub activities. The sub-categories include:
- Direct value-creating activities such as sales calls, advertising campaigns, online consulting.
- Indirect activities for the purpose of making the main activities run directly and smoothly such as sales force management, customer record keeping, sales data analysis…
- Quality assurance activities to help raise the main price chain such as editing ads, content.
Step 2: Define sub-activity for support activity
Some activities to support the development of the value chain of enterprises such as: resource management, finance and accounting, technology development, procurement, you just need to define sub-activities create value for it.
Step 3: Identify the links
Find connections between the activities you define. This will take a lot of time but it is a key to increasing the competitive advantage of the value of the chain.
For example, the link between sales force and sales is customer care.
Customer care is a link in sales activities
Step 4: Look for opportunities to add value
You need to check the exact activities and links that you have identified and then think of ways to increase that value for your business. An enterprise's value chain reflects a company's overall business strategy. When deciding to improve the value chain, try to set yourself apart from the competition, carefully reviewing your steps with other members of the company.
In general, the enterprise value chain approach is not the same. Depending on the product, service or type of business, each business has a different direction. Through the sharing, we hope that the article will help you have a general view of how important the value chain is in the development of the company.
