Business Management Idea Known as Porter's Value Chain Model

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Differentiation is very important in today's saturated market, Value chain Explains how an organization differentiates its product by analyzing the chain event which occur within their company. The value chain model also known as Porter's value chain analysis, a concept developed by Michael Porter in 1985. Value chain model is a collection of activities that are performed by a company to create value for its customers. Value Creation create added value which leads to competitive advantage (Niebuhr, 2016). This includes the process from start to finish. Thus, it is a system that is used by company to make profits. Porter's chain has numerous activities such as primary and secondary activities. The activities which provide strength, sustainability to the company called primary activities, and the activities used by the company for differentiation and maintenance called as secondary activities. Both activities Primary and Secondary are important for the company.

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Primary actives, these activities, have impact the production, maintenance and sales of product and services. These activities include, Inbound Logistics which involve receiving, storing and distribution of raw material and it also include relationship with supplier. Operations, these include those activities which convert input into output which means it converts raw material into finish good or semi-finished goods (Liao, Hu and Ding, 2017). Outbound Logistics these related to delivering the finished goods and services to customers, also storage and transportation and distribution. Marketing and sales, it includes advertising, promotion, and pricing of product and services. Also, selling product and process of communication, deliver and offers that make customer to buy that product. Services, include services which are providing after sales of product to customers, such as customer service, maintenance, repair, refund and exchange.

Secondary Activities also called supportive activities that support the primary activities. Company can improve their primary activities with secondary activities. It plays an important role in primary activities. This makes primary activities more effective for the company. These activities include, Infrastructure, an infrastructure is most important for primary activities, it makes the company to do their daily activities and maintain their operations, this includes all legal, administrative, financial management etc. Human Resource management, managing employee is useful for all primary activities (He and et.al., 2016). It includes following activities such as recruiting, hiring, training, and retaining staff. Procurement, it means acquisition of goods from external source for the firm and decision-making of purchase. It includes negotiation of price with the supplier. Technology development, it includes equipment, hardware, software for research and development.

MARKS and SPENCER

Marks & Spencer is a British multinational retailer company founded in 1884, 135years ago by Michael Marks and Thomas Spencer in Leeds. It deals in various segment such as clothing, home products and food products. It provide good quality product at lower cost. The firm has 615 stores that only deals in food products and currently there are 1043 stores across U.K.. The company operate worldwide and its headquarter is situated in Westminster, London and has employed 80,787 people , among them 71% are females.

Marks Spencer provide various options to its customer as its deals in various categories, which includes clothing, cosmetic, household items, luxury goods (Marks & Spencer PLC, 2019). There have been growth in the worldwide revenue of the company and more than half of its revenue generate from food segment. It has experienced tremendously growth in online platform but the company has suffered a losses which has resulted in the closure of many stores across the world.

Marks & Spencer includes various brands such as Per Una, Autograph, Limited, Rosie, Blue Harbour, M&S Collection and M&S Energy. It ranks highest in term of customer perception as compared to other UK brands. Based on Buzz Scoring rating the company is rated as eighth leading brand across all industries (Sabanoglu, 2019). It had been seen that in recent year the sales of cloth have reduced but on the other side the sales of food has increased. In November 2008, the organisation started selling branded goods such as Kellogg s Corn Flakes.

Since 2012, the customers are not satisfied with the company and it was confirmed that 100 stores will be closed by 2020 due to “radical plan. It is not yet sure that more stores will be closed down or not.

Porter's value chain model involves reviewing both primary and support activities of an organization to grab competitive advantage in order to achieve greater value. Support activities do not add value but helps in efficiently delivering of primary activities.

The primary activities are directly related to production and selling of products to the customers. First, inbound logistics, M&S has been recognized for its sustainability program for creating changes in its global supply chain. Thus, it has a strong foothold in global supply chain which has a major advantage over its competitors. Apart from this, other differentiating factor is procurement of high quality inputs and reducing input handling damage. Second is operations, it includes both manufacturing and service operations. Analysis of these activities is important for improving productivity and ensuring success which includes producing, packaging, assembling and testing. Also M&S is working on upgrading its IT system which can help M&S to achieve profitability, growth and smooth supply chain (Nyame-Asiamah, and Ghulam, 2019). Third is outbound logistics, delivering products to its final consumers through different intermediaries. For M&S, the greatest value lies in its outbound logistics. Its every warehouse is linked to its stores, supported by IT systems which helps in effective handling and shipping of the products, reduces product damage, timely delivery of product, smooth order processing etc. Fourth is marketing and sales, M&S team works with the latest technologies to highlight benefits and differentiating factors of their products over its competitors. It uses number of activities such as sales force, advertising, promotional activities, multi channel experience improves shopping experience, customer loyalty and engagement and increasing brand awareness. For long term benefit, it should maintain a good relationship with suppliers and customers, offering the latest business insights to the customers and proper co-ordination between departments. Last is services, M&S knows that customer satisfaction is the key to customer loyalty for which it has come up with certain offers like free delivery above certain amount, easy and free return within the time frame. Nowadays, customer considers post sales services very important. So company must analyse its services and use it to spread positive words about the company.

Figure 1Value Chain Model

(Source: Value Chain Analysis, 2017)

The support activities assist primary activities in coordinating and facilitating their activities. It includes 4 activities, first is procurement, it involves acquiring the inputs such as raw material, supplies, machinery, equipment etc. M&S should carefully analyse its procurement activities to optimize its inbound, operational and outbound activities (Åšmigielska and Oczkowska, 2017). Also, it should highlight areas of value addition, differentiation and cost reduction. Major differentiating factor can be reliable transportation, fast delivery, procurement of high quality raw material and inputs. Second is human resource management, effective implementation on HRM, evaluating its different aspects such as recruiting, selecting, training, rewarding, performance management etc., increasing responsibility and accountability of employees will be of great importance to the value chain, attractive rewards encourages creativity and increases productivity. Third is infrastructure, it denotes varied activities such as planning, organizing, financing, quality management, legal matters etc. M&S can optimize its value chain by effective infrastructure management which helps in controlling overhead cost, advanced IT system helps in getting deeper consumer insights and wide database for effective marketing (Knight and Ellson, 2017). Last is technological development, in these advances technological era, every activity is integrated to a technological driven support system. Some of them are — customer services, automated system, product design, research, data-analytics etc. and M&S has classified its department on the basis of this. Apart from these, it can set differentiation through new product development, innovative product features and design.

Porter's value chain model has helped me in better understanding of Marks & Spencer's internal business environment. By using it, M&S can procure and source high quality raw material and inputs and increase customer loyalty on its basis. The company can build a strong brand image and can take competitive advantage through aggressive marketing and product development tools. M&S can also achieve competitive differentiation by speeding up the delivery of its products to end consumers, reducing the rate of damage products or defected products. It can improve its human resource practices by analysing its human resource activities, emphasizing more on its activities, investing more on employees training and development which enhances confidence among its employees (Mudambi and Puck, 2016). M&S should analyse its support activities in order to provide premium customer support services. As per my understanding, it should work more on analysing its operational activities to grab the first mover advantage, by tapping on those areas which is untouched even by its competitors. Along with that company should try to use backward integration tool by purchasing or merging its suppliers in order to ensure timely availability of materials and meeting up with the demand and sales forecasts, which in turn will provide more control over inbound logistics and reduces the risk of shortages. One of the most important reason for conducting value chain analysis is to maximize operational efficiency, reducing waste and integrating sustainability in its business which not only helps in waste reduction but also building a positive public image (Hertati and Sumantri, 2016). M&S can grab the benefit of cost reduction but for which it requires to map all the activities and the cost associated with that. It needs to consider all the relevant points that would be useful in making necessary adjustments. There are other number of factors or drivers that can add value, set differentiation and productivity such as integration and interrelationship, which can help the company take the benefit of coordination, timing, optimum capacity utilization, continuous learning and development, adopting the latest technology and organizational policies and procedures. But it should be kept in mind that cost can be reduced to some extent. M&S should take customer preferences and perceived value because sometimes lower price means low quality goods and higher price means luxury goods serving different sections of society. As per my analysis, company should carry out this analysis on a different time intervals to know about the changes, preferences and loop holes and modify the practices and strategy at the right time, to procure unique and valuable inputs that are not even available to is competitors. Apart from the benefits, there are certain challenges associated with the analysis (Maon and Sen, 2016). M&S might lose its vision, high level of complexity might make it difficult to separate primary and support activities, division process can be time-consuming and difficulty in finding relevant information if information system is not properly structured. To look after all these things, employees with relevant industry expertise will be very helpful as they know how to deal with these factors.

CONCLUSION

From the above analysis it can be concluded that Marks & Spencer can be benefited from conducting Porter's Value Chain Model. It will help in knowing leakages in the internal system so that proper action can be taken before it is too late and take competitive advantage. Every activity is assigned different weightage based on its application so that individual assessment can be done. M&S has fully structured management system which reduces time and helps in smooth implication of new strategies which will add value to the business, bypassing the competitors and overcome with the challenges.

Read also: Study of Unethical Practices on Business Environment

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