Principles of Management Lecture 3 - Value Chain Management

The coordinated series or sequence of functional activities necessary to transform inputs such as new product concepts, raw materials, component parts, or professional skills into the finished goods or services customers value and want to buy

The development of a set of functional-level strategies that support a company’s business-level strategy and strengthen its competitive advantage

• Product development function
• Marketing function

Inputs: new product ideas, marketing research, component parts

• Materials management function
• Production function

Changed into (conversion): People's ability and knowledge, machines, computers, functional skills

• Sales function
• Customer service function

Outputs: goods and services

• Improving quality
• Improving efficiency
• Improving innovation
• Improving responsiveness to customers

Result in competitive advantage from low costs and differentiation.

Successful companies know what their customers want...

• Customer Relationship Management (CRM)
  Not just about sales and marketing. Use IT to develop an ongoing relationship with customers to maximize the value an organization can deliver. Access to market intelligence!
   

• What do customers typically want?
  - Lower price
  - High-quality
  - Quick service and good after- sales service
  - Products with many useful / valuable features
  - Products that are tailored to their unique needs

High-quality shows in design, features, reliability and after-sales support...

Impact of increased quality on organizational performance: Two dimensions

• Increased reliability leads to higher prices and higher profits
• Increased productivity leads to lower prices and higher profits

Implementing Total Quality Management (TQM) or Six Sigma