Question

Define value chain. Explain the importance of a value chain to a businesses strategy.

Answer 1

The value chain is the methodology by which a company adds value to its products in the eyes of the customer. Such value can be in terms of quality, marketing, and advertising campaigns, after sale services, warranty period extension etc.

The importance of value chain to a business strategy are as follows:

1. Improved customer relations:

The value chain improves the customer relationship for a business. Since they are provided with after sales benefits and the queries are resolved even after the sale of goods this helps develop trust. This even helps develop customer loyalty.

2. Improve goodwill of the firm:

The good value chain adds an advantage to the organization thereby adding to the goodwill of the firm. It enhances their market image in this manner they can easily raise funds for plans for expansion.

3. Improve delivery

Since value chain focuses on inbound logistics the relations are improved not just with the customers but with other stakeholders as well such as suppliers, partners etc.

4. Lead to higher sales due to promotion by word of mouth:

This leads to a higher sales since the customers are satisfied and help to promote the product through word of mouth which is the most effective means of promotion.