Value Chain Analysis
According to Hitt et al (2011) Value chain analysis allows the firm to understand the parts of
its operations that create value and those that do not. Understanding these issues is important
because the firm earns above-average returns only when the value it creates is greater than
the costs incurred to create that value. Its purpose is to identify which operations are most
valuable to the company and which are developed to provide competitive advantage. This
process describes the primary and supporting activities that provide value to a company's
final product, and then examines them to cut costs or boost differentiation. Family dollar’s
value chain can be segmented into primary and secondary activities.
Primary activities
Primary activities are involved with a product’s physical creation, its sale and distribution to
buyers, and its service after the sale (Hitt et al., 2011). The primary activities of Family
Dollar deal withs its service, marketing, consumer sales, distribution, operations, and
customer loyal creation. Family Dollar relies on customer satisfaction and brand loyalty to
stay profitable. These primary activities operate together to produce overall consumer
satisfaction, which is what keeps Family Dollar competitive over the years. In the case it
mentioned that “In 2008, most of Family Dollar’s sales growth came from its core customers.
However, by 2009, about a third of Family Dollar’s customers were from a different
demographic: customers earning up to $70,000 per year, and who traditionally had not
shopped at dollar stores, were increasing as a percentage of sales” Family dollar gain value
by catering to low to lower-middle income customers. The company added value by
providing products at lower prices that customers could afford. “Because of the recession,
they customer were shopping for value and were attracted by Family Dollar’s everyday low
pricing strategy.” To boost their primary activity Family Dollar started a thorough store
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refurbishment effort to boost the shopping frequency of its key low-income and middle-
income customers and families. Family dollar was able to capitalize off these primary
activities which helped the company to stand out from its competitors.
Secondary activities
Support activities provide the assistance necessary for the primary activities to take place
(Hitt et al., 2011). The firm's infrastructure, technological development, human resource
management, and buying or selling abilities are only a few of Family Dollar's support
activities. These activities are still vital, but they are more of support than primary activities.
For technological development, its seen where the technology in Family Dollar's registers and
point-of-sale were upgraded. The company was able to accept credit cards and electronic
benefit transfers, such as food stamps, because of the changes. Changes in technology also
allowed managers to adopt computer-based solutions for better training, analytics, and
workflow management. This helped family dollar develop a system to better assist its
customers and build value by accepting food stamp to further aid low income earning
families who were its core customers. As it relates to procurement family dollar Family
Dollar created an integrated procurement organization that used an online system for
purchase of non-merchandise items, such as store supplies. “In 2011, the company re-
engineered many of its core store processes, including restocking and in-store
merchandising.” For human resource management each store had a store manager, who was
responsible for hiring and training employees and providing customer service.
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