Management Notes

Reference Notes for Management

Which of the following is a primary activity in the value chain?

Which of the following is a primary activity in the value chain?

a) purchasing
b) accounting
c) post-sales service
d) human resource management

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The Correct Answer for the given question is option c) post-sales service


Answer Explanation

Value Chain 

A value chain refers to the series of activities performed by a firm in a specific industry to produce a valuable product (good and/or service) for the customer. In his book Competitive Advantage: Creating and Sustaining Superior Performance, Harvard Business School professor Michael Porter introduced the value chain concept for the first time in 1985. An organization can be viewed as a system based on its value chain, which is composed of subsystems each with inputs, transformation processes, and outputs.

Organizations can identify and group their own business functions into primary and secondary activities with the help of value chain models. Organizations can better understand value chains by analyzing activities, subactivities, and their relationships. Each activity or subactivity can be analyzed to determine whether the output of each can be improved while keeping in mind the cost, time and effort they require. Analyzing value chains from an organization’s own perspective is called a value chain analysis.

Benefits of Value Chain Analysis

By understanding and evaluating value chains, organizations can recognize positive and negative cost efficiency sources. The following are some benefits of value chain analysis:

  • Assist in making decisions about various business activities.
  • Identify ineffective areas and take corrective measures.
  • Identify the interconnections and dependencies between the different business activities and areas. Nearly all business activities are affected by factors such as human resources management and technology.
  • Improve productivity and reduce costs.
  • Create competitive advantages by reducing costs.
  • Recognize strengths and areas for improvement.

Primary activities in the Value Chain

The creation, sale, maintenance, and support of a product or service are the primary activities. These activities include:

Inbound operations: Managing and handling resources provided by external sources — such as vendors and supply chains. Inputs are outside resources that flow into the system. Raw materials are sometimes included.

Operations: The process of transforming inputs into “outputs,” that is, the product or service that a business sells. A core product is any product that can be sold at a higher price than the cost of materials and production to generate a profit.

Outbound logistics: Outputs are delivered to customers. These processes involve systems for storing, collecting, and distributing products to customers. Managing internal company systems and systems from external organizations is part of this process.

Marketing and sales: The practice of increasing visibility, reaching marketing audiences, and explaining to consumers why a product or service is worth buying. These services include advertising and brand-building.

Service: Activities that encourage a long-term relationship with customers who have purchased a product or service, including customer service and product support.


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