In the late 80’s, Goodyear Tire and Rubber Co, then the largest global tire company, initiated

and adopted TQM (Total Quality Management)-

and pursued an objective of “defect-free” products.

This effectively placed its sales and distribution network (built over almost a century) under the operations group and found itself relegated to the
background- causing “sour relationships” between the two groups.

The focus on manufacturing effectively cannibalized its existing distribution system such that it lost grip and control over their retailers.

The firm’s competitive position eroded as its distribution system became compromised- unable to meet promptly orders of retailers which caused
its loyal dealers to revolt against the firm.

The company’s pension became underfunded by $2 B as funds were badly needed in other areas of endeavors. In short, TQM and disregarded
their most valuable strength-its distribution system and network.

Review of SWOT Analysis

SWOT Analysis lists carefully the strengths, weaknesses, opportunities, and threats of a firm- the starting point but definitely not the primary
basis for evaluating a company’s internal strength and weakness or the opportunities and threats in the environment.

Value Chain Analysis

 The strategic analysis of a firm that uses value- creating activities- and which views it as a sequential process of value-creating
activities.
 A process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities
to reduce costs or increase differentiation.
 Value chain- represents the internal activities a firm engages in when transforming inputs into outputs.
 Value- the amount buyers are willing to pay for what a firm provides them and measured by total revenue- a reflection of the price a
firm’s product commands and the quality it can sell.
 Profitability- measured by the extent that the value it receives exceeds the total production costs which is a key concept used in
analyzing a firms competitive position.
 Maximum Benefit- can be derived from the analysis if a firm views the concept in its broadest context and disregard the boundaries of
the organization- that is consider the more encompassing value chain including suppliers, customers, and alliance partner.
 Thorough Understanding Required- as how value is created within and the other organization that are involved on the overall supply
chain or distribution channel in which the firm participates.

Two Different Categories of Activities

1. Primary Activities- sequential activities of the value chain that refer to the physical creation of the product or service, its sale and
transfer to the buyer, and its service after sale, including inbound logistics, operation, outbound logistics, marketing and sales, and
service.
2. Support Activities- activities of the value chain that either add value by themselves or add value through important relationships with
both primary activities and other support activities, including procurement, technology development, human resource management,
and general administration.

Primary Activities

1. Inbound Logistics- primarily associated with receiving, storing, and distributing inputs to the product-includes material handling,
warehousing, inventory control, vehicle scheduling, and returns to suppliers.
 Just-in-time Inventory- designed to achieve efficient in-bound logistics
 a strategy to increase efficiency and decrease waste by receiving goods only as they are needed in the production process,
thereby reducing inventory costs. In other words, JIT inventory refers to an inventory management system with objectives
of having inventory readily available to meet demand, but not to a point of excess where you must stockpile extra products.

Example:

 Toyota- parts delivery arrive at the assembly plants only hours before they are needed- and helps it fulfill its
commitment to fill a buyer’s new car order in five (5) days, faster than Hinda Motors who can do it in 15 days.

2. Operations- include procedures for converting raw materials into a finished product such as machining, packaging, assembly and
facility operations. Operational systems are the guiding principle for the creation of value.
 Environmentally friendly manufacturing is one way to use in operations to achieve competitive advantage. This type
of manufacturing protects the planet from exploitation and conserves natural resources.

Example:
 Shaw Industries is a business that is known for its concern for the environment and has received many reputation
enhancing awards for its recycling efforts.

3. Outbound Logistics- these are all activities that are related to delivering the products and services to the customer. It includes
finished goods, warehousing, material handling, delivery vehicle operation, order processing and scheduling.

Example:
Campbell Soup is a business that applies outbound logistics. They use an electronic network to facilitate its
continuous replenishment.

4. Marketing and Sales- these are all processes related to putting the products and services in the markets including managing and
generating customer relationships. Basically, these are the activities that help convince a consumer to purchase a company’s product
or service.

Good products are not always good enough, the key is to convince your channel partners that it is in their best interests not
only to carry your product but also to market it in a way that is consistent with your strategy.

Examples:
Monsato, makers of Saflex Windows, educates its distributors to improve the value proposition of its product by knowing
how they sell it, the challenges they face and what they need to sell the products.
Bardines, a business that charges club membership to credit card customers without their prior approval.
Fleet Mortgage, add dental coverage and home insurance to mortgage loan customers without their knowledge.
HCI Direct, direct mail firm that charges for panty hose samples that customers did not order.
Jane online services is an internet service provider charged for failing to provide customers with a telephone number to
cancel services.

5. Service- includes activities to maintain products and enhance consumer experience such as customer service, maintenance, repair,
refund, and exchange.

Examples:
Sephora.com is a customer service rep taking a call from a repeat customer has instant access to what are the likes of their
customers.
 Ritz Carlton uses its chainwide guest recognition data base to tract the preference of their guest.

Support Activities

1. Procurement - it deals with the sourcing activities, negotiation and strategic selection of goods and services that are usually of
importance to an organization. It is also not the purchased inputs themselves. It includes raw materials, supplies and other consumable
items as well as assets.

2. Technology Development - relates to really anything in regards to inventions or innovations. Development is essentially the
process that takes a product or idea from a hypothesis to a usable product. Technology development relates to its products and its
features to support value chain.

3. Human Resources Management - is the strategic approach to the effective management of people in a company or organization
such that they help their business gain a competitive advantage. They are assigned in recruiting, hiring, developing and compensation
of all types of personel.

4. General Administration - this is the activities that includes general management, planning, finance, accounting, legal and
government affairs, quality management and information system.

An effective administrator has the ability:

 To understand general concepts of Administration

 To enhance the office staff’s ability to manage and organize office effectively and professionally
 File in the proper way and filing standard
 Develop an appropriate office management strategy
 Develop an appropriate assets management strategy
 Able to develop administrative procedures
 Able to plan and control administrative budget

 Administration typically supports the entire value chai and not individual activities
 Can be a source of competitive advantage- it can negotiate and maintain ongoing relations with regulatory bodies; effective
information systems can contribute significantly to cost position; top management plays a vital role in dealing with important buyers.
  Strong and Effective leadership of Top Executives - make a significant contribution to an organization success. For example, Carlos
Ghosn. Carlos Ghosn is a Brazilian-born French businessman of Lebanese ancestry. He is formerly served as CEO of Michelin North
America, Chairman and CEO of Renault, Chairman of AutoVAZ, Chairman and CEO of Nissan and Chairman of Mitsubishi Motors,
Chairman and CEO of the Renault-Nissan-Mitsubishi Alliance. In 1996, Renault’s CEO Louis Schweitzer hired Ghosn as his deputy
and charged him with the task of turning the company around from near bankruptcy. Ghosn elaborated a plan to cut the costs for the
period 1998-2000, reducing the workforce, revising the production processes, standardizing vehicle parts and pushing the launch of
new models. The company also undertook organizational changes, reforming work methods and centralizing the research and
development, and also reduce vehicle conception costs while accelerating such conception.

 Information system can play a key role in increasing operating efficiencies and enhancing firm’s performance such as Walgreen Co’s
Intercom Plus.

IntercomPlus is the Walgreen Company’s proprietary pharmacy computer system. It was founded as Intercom in 1981 and it was the
first large retail pharmacy computer system. It relies an VSAT satellite access and/or broadband connections to link over 8,000
Walgreens retail, mail, service and specialty pharmacies. Through its usage, Intercom made Walgreens the largest private user of
satellite transmission data in the world, second only to the U.S Government. The design of the system enables seamless store-to-store
prescription filling and making. It specializes in filling prescriptions, health and wellness products, health information and photo
services.

Interrelationship Among Value Chain Activities Within and Across Organization

(Value Chain Analysis/VCA - is a process where a firm identifies its primary and support activities that add value to its final product
and then analyze these activities to reduce cost or increase differentiation. Value Chain - represents the internal activities a firm
engages in when transforming inputs or outputs.)

Managers must not ignore the importance of Interrelationship Among Value Chain Activities Within and Across Organization.

 Interrelationships among activities within the firm

 Relationships among activities within the firm and with other stakeholder such as customers and suppliers.

Examples:

 The AT&T’s innovative resource line where top employees can lend their expertise in all of the organization’s value-
creating activities.
 Campbell Soup’s use of electronic networks that enabled it to improve its efficiency in outbound logistics. It also helped
the firm manage the ordering of raw materials more effectively, improve its production scheduling and help its customers
better manage their inbound operation
 Strategic
Management

Assessing the Internal

Environment of the
Firm
(Written Report)
Cosico, Zion
Francisco, Thricia Marie
Jaropojop, Angelica
Nicolas, Niza Katrina
Tabuldan, Deanielle Anne
(GROUP 2)

BSA- 201