VALUE CHAIN ANALYSIS
• sequence of interlinked undertakings that an organization operating in a
specific industry engages in
• it looks at every phase of the business from the time of procurement of raw
materials to the time its products reach its eventual end users or consumers
SUPPLY CHAIN MANAGEMENT
• broad continuum of specific activities employed by a company
SUPPLY MANAGEMENT
• purchasing/procurement
• identifying material & service needs
• locating and selecting suppliers / negotiating and closing contracts
• acquiring the needed materials, services, equipment
• monitoring inventory Stock Keeping Units (SKU)
• tracking supplier performance
• managing supplier relationships, identifying strategic sources, accurately
forecasting demand requirements, understanding inventory management
GOAL: To obtain the right materials by meeting quality requirements in the right
quantity for delivery at the right time and the right place, from the right source,
with the right service, and at the right price
2 CATEGORIES UNDER SUPPLY MANAGEMENT
1. Sourcing and Ordering
2. Inventory Management
1. SOURCING AND ORDERING
• SKU: date, identification number, originating department, account to be charged,
complete description of the raw material
• identify and analyze sources of supply (request of quotation, request of proposal
and request for bid)
• compare and evaluate from potential suppliers; terms of contract
• purchase order (PO)
• confirm the order
• invoice clearing and payment follows
GOAL: Value is generated when supplier relationships are created and managed
in delivering quality products, delivering on time, delivering at competitive prices,
providing good service back-up when needed, and keeping promises
2. INVENTORY MANAGEMENT
• ordering the right quantity of SKU’s at minimum inventory costs
• to buffer uncertainty
1. unprocessed purchased input
2. WIP (Work-in-process)
3. Finished goods (completed products from shipment)
4. Maintenance, repair, and operating supplies (MRO) - materials used when
producing the products but are not parts of the product
Formula: Ordering costs + Carrying costs = Inventory costs
where:
• ORDERING COSTS - “set-up costs” variable costs associated with placing
an order with the supplier like managerial and clerical costs in preparing the
purchase
• CARRYING COSTS - “holding costs” costs incurred for holding inventory in
storage like handling charges, warehousing expenses, insurance, pilferage,
shrinkage, taxes and costs of capital
Questions: “how much to order?” and “when to order?”
PRODUCTION AND OPERATIONS
2 CATEGORIES UNDER PRODUCTION AND OPERATIONS
1. MANUFACTURING - process of producing goods using people or
machine resources, “industrial production”
2. ASSEMBLY - process of putting together raw materials into a desired
output
GOAL: Quality raw materials and parts, efficient production layouts and
processes, and employees with skills and motivation are essential to effective
transformational processes
LOGISTICS (LOGISTICS CIRCLE)
5 CATEGORIES UNDER LOGISTICS
1. WAREHOUSING - physically packing finished goods
2. SCHEDULING - organizing inventory units and booking them for shipping
3. DISPATCHING - products are for transfer
4. TRANSPORTATION - goal is to minimize transportation costs (location site,
ease, or gravity of traffic, safety and labor requirements)
5. DELIVERY- specified site is undertaken, closed the entire logistics circle
MARKETING AND SALES
• offer competitive pricing, special offers, quantity discounts, and volume
sales
• advertisements (newspaper, magazines, radio, billboard, TV, social media, etc.)
• developing salespeople through result-oriented sales trainings, giving
competitive salaries
2 CATEGORIES UNDER MARKETING AND SALES
1. PROMOTION
2. SELLING
GROWTH STRATEGIES
• to achieve its main objectives of increasing in volume and turnover
**In accounting: number of times an asset (cash, inventory, raw materials) is
replaced / revolves during an accounting period
2 TYPES OF GROWTH STRATEGIES
1. INTERNAL GROWTH STRATEGIES
2. INTEGRATIVE GROWTH STRATEGIES
INTERNAL GROWTH STRATEGIES
1. MARKET PENETRATION - selling more of its products/services to its current
customers/buyers; least risky
2. MARKET DEVELOPMENT - sell more of its current products by seeking and
tapping new markets (Pastel to Visayas and Luzon)
3. PRODUCT DEVELOPMENT - sells new product to an existing market (Downy
with perfume scent)
4. DIVERSIFICATION - creating differentiated products for new customers (new
products for new customers)
COMPETITIVE STRATEGIES
• essentially long-term action plans prepared with the end goal of directing how
an organization will survive and compete
• formulated to help them gain competitive advantage after evaluating and
comparing their strengths and weaknesses against their competitors
5 CATEGORIES UNDER COMPETITIVE STRATEGIES
1. LOW-COST LEADERSHIP STRATEGY - offer products and services at the
lowest cost possible in the industry (Ex. Peso fare)
2. BROAD DIFFERENTIATED STRATEGY - provide variety of product/service
features that competitors do not or are not able to offer to consumers (Ex.
Sierra del Oro, Paragliding)
3. BEST-COST PROVIDER STRATEGY - combination of the low-cost
leadership and broad differentiated strategies. Goal: keeping its customer
(Ex. Aizylim, ukay-ukay, Kaking)
4. FOCUSED LOWER COST STRATEGY - concentrates on a limited market
segment and creates a market niche based on lower costs (purchase stocks
in bulk, avail in discounts, and therefore sell at low prices; Ex. plastic cellophane
business)
5. FOCUSED DIFFERENTIATED COST STRATEGY - concentrates on a limited
market segment and creates a market niche based on differentiated
features like design, utility, and practicality (Ex. Rolex - Usually applies to
branded)
OTHER COMPETITVE STRATEGIES
1. INNOVATION STRATEGY - difficult to implement, new and original
2. OPERATIONAL EFFECTIVENESS STRATEGY - avoid financial leaks and
inefficiencies, harnessing better facility and equipment maintenance,
increasing work force productivity
3. ECONOMIES OF SCALE - lowers costs because of volume (more product is
produced, the lower the costs of producing the product)
4. TECHNOLOGY STRATEGY - going digital (accounting, marketing and
purchasing etc.)
NOTE: ENTERPRISE RESOURCE PLANNING - facilitates processes to radical speed
by shortening completion time.
LIFE CYCLE STRATEGIES - lifespan that a commodity/service undergoes from its
introduction stage to its growth, maturity, and decline stages
1. INTRODUCTION STAGE: launching the product/service for acceptance (Ex.
promotion, giving discounts, market development)
2. GROWTH STAGE: gains acceptance by the consumers, sales slowly increase
(Ex. continuous market development and improvement, branding, building
customer loyalty, promoting repeat business through customer patronage)
3. MATURITY STAGE: established products tend to be steady (Ex start
reinventing, formulation of marketing strategies)
4. DECLINE STAGE: reach its lowest point, sales and profits decline (Ex.
aggressive marketing or simply exit the market)
STABILITY STRATEGIES
• Decide to keep the status quo
• Not adopting any growth or competitive strategy
• Comfortable with their current market niche
RETRENCHMENT STRATEGIES - encounters serious difficulties
1. LIQUIDATION - losing, business may be terminated, and its assets may be
sold
2. DIVESTMENT - when the company does not fit well in the organization,
stockholders would sell it or set it as a separate corporation
3. TURNAROUND STRATEGY
• climate and culture
• products and services
• production and operations
• infrastructure
• finance
INTEGRATIVE GROWTH STRATEGIES
• external growth strategies, involve investing the resources of the organization in
another company or business to achieve growth goals.
• Acquisition Strategies
2 CATEGORIES UNDER INTEGRATIVE STRATEGIES
1. HORIZONTAL INTEGRATION
• acquires another competing business
• eliminate potential/real competitors - deadly threats to an organization
• expand its market demographically
• help increase its revenues
2. VERTICAL INTEGRATION
• Backward and Forward Integration
• consolidation into an organization other companies involved in all aspects of a
product’s process from raw materials to distribution
➢ BACKWARD INTEGRATION: buys one of its suppliers (more reliable and cost
effective
supply of input, secures quality output, help increase profitability)
➢ FORWARD INTEGRATION: buys distributors or companies that are part of its
distribution chain. (eliminating distribution costs, reinvent its marketing outlook)
GLOBAL STRATEGIES
1. INTERNATIONAL STRATEGIES - sells their excess products outside their home
markets
2. MULTINATIONAL STRATEGIES - involved in a number of markets outside the
home country (Ex. Jollibee)
3. GLOBAL STRATEGIES - treats or considers the world as a whole, one market
and one source of supply with slight local variations (Ex. Nestle, Nike)
➢ MARKET SHARE:
• relative sales percentage of a company in relation to the total sales
percentage of the market in consideration.
• How the company stands with respect to the market and its competitors
➢ MARKET GROWTH: refers to an increase in demand over time.