Every industry or organization has got a chain of activities that makes it operational. The activities are arranged in such a manner that a product that is being produced gains additional value by passing through each activity. Each activity has got a unique value from the rest (Porter 3). All these value adding activities form what is known as a value chain.
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A proper understanding and application of the value chain is vital in the strategic management of any organization (Porte 7). The value each activity adds to a product does not necessarily depend on the cost of the activity. An activity with a low cost can add more value to the product more than a more costly one. This paper will highlight the importance of primary and support activities in a value chain.
Primary activities in a value chain are those employed in the direct production of a product. In a firm that produces iron sheet, some of the primary activities include operations like rolling, heat treatment, galvanizing and corrugation. There other very important activities ranked as primary activities in the value chain (Schmitz 6). These activities include inbound and outbound logistics, sales and marketing activities and lastly customer service activities.
Inbound logistics help in bringing raw materials and other supplies to the factory on time while outbound logistics are important in distributing the finished products to the customers. Customers can not buy the product if proper marketing and sales activities are not in place. Marketing is important in identifying customer needs and helps the organization identify the areas that need value improvement (Schmitz 6).
The value chain also consists of other activities that support the primary activities. For example, the production of iron sheets without a proper infrastructure in place is almost impossible. Infrastructure includes things like machines, control systems and organizational culture (Porter 12). The value of products depends on the human resource in place. Human resource management activities like recruitment and training have to be professional and credible for value to be maintained in an organization.
Activities that create value need to be updated with current technologies for the required value to be maintained. Technological advancement is thus another vital supporting activity. Procurement is another very important supporting activity. The purchase of inputs should be done professionally because the value of a product will depend on the value of the raw materials and supplies (Porter 19).
The primary objective of the value chain activities is to provide customers with value for their money. If value addition is achieved at a lower cost, then the organization will probably make profits in their sales. The cost at which the customer is willing to buy the product must exceed the cost of value addition for the organization to make profits.
Although both the primary and supporting activities are important in value addition, primary activities are more important to the firm. A company should invest heavily in primary activities because they are very basic in the production of products. Sub-standard primary activities will automatically lead to substandard products that have no value.
Porter, Michael E. Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press, 1998. Print.
Schmitz, Hubert. Value Chain Analysis for Policy-makers and practitioners. Geneva: International Labor Organization, 2005. Print.