Question

Differentiate between primary and support activities that create value for a company's customers. How can managers determine whether an activity enhances customer value?

Answer 1

Value chain analysis divides company activities into core activities and support activities necessary to create value for customers. Key activities include logistics, inbound and outbound production (goods and services), marketing and sales and customer service. Key activities include product development, marketing and distribution to customers, as well as support and after-sales service. Maintenance activities include business infrastructure, human resource management, technology development and supply. Each activity provides the necessary resources and infrastructure for key activities. All core and support activities are a source of strengths or weaknesses for the company. Managers determine whether each activity increases or decreases customer value, and they incorporate this knowledge into the strategy development process. An analysis of key activities and support activities often involves finding activities where improvements can be made with great benefit.

Primary Activities - When analyzing primary activities, managers are always looking for areas where the company can increase the value offered to its customers. For example, managers can understand the production process and find new, more efficient production methods to reduce production costs and improve quality. Customer satisfaction can be enhanced by improved logistics management, which reduces the time required to deliver products to buyers, or through better customer service.

Support activities - Support activities help companies to carry out their core activities. For example, the actions of an employee of a company are crucial to its success. Production, logistics, marketing, sales and customer service benefit when employees are competent and well-trained. International companies can often improve the quality of their products by investing in staff training and management development. As a result, quality assurance can increase a company's efficiency in production, marketing and sales and customer service activities. Efficient orders (or deliveries) can find low-cost raw materials or intermediaries and ensure timely delivery to the production plant. Finally, advanced infrastructure not only improves internal communication, but also preserves the culture of the organization and all core businesses.