Question

Isaiah owns and operates a muffin shop in Durango, Colorado. His business level strategy is cost leadership, with a narrow focus. Given the primary and secondary activities within the value chain, explain what these activities would look like for Isaiah's cake shop

Answer 1

With an increase in competition for high-quality products, low cost & outstanding customer service, a business must continually access the value they create. In the case of Isaiah's muffin shop, he can conduct a value chain analysis to break down each process of his business to create a place for innovation & to add more values for the business. Value chain is a range of activities including design, manufacturing, marketing, distribution- businesses undergo to bring offerings from a conception of delivery. For the firms that produce goods, it starts with raw materials & ends up when they get sold to customers. Havard Business School's Michael Porter was the first one to introduce the concept of the value chain. Porter also developed the five force models to evaluate businesses to rank themselves within today's market place. However, competitive advantage can not be perceived by looking at any firm as a whole but porter said "It starts with many different activities a firm performs starting with designing the product to supporting it. Each of these processes contributes to a firm's relative cost position & creates a base for differentiation." Coming to Isaiah's shop his business-level strategy is cost-leadership with a narrow focus. Continuing lower cost in business may not be possible for a long time when you have so many competitors in a single market place but using porter's five forces model businesses can analyze its position & work accordingly to get competitive advantage. As Isaiah runs a muffin shop these could be his Primary level activities:-

• Inbound logistics:- It involves receiving, storing & distributing the raw materials used in the manufacturing process i.e. cocoa powder, baking soda, egg, etc.
• Operations:- When raw materials become a final product i.e. Cake, etc.
• Outbound logistics:- When the product is delivered to customers.
• Marketing & Sales:- It involves Ads, promotions, channels, pricing & ensuring that the final product is reaching its target market.
• Service:- It includes the performance of the product & post-sales relationship with the customer.

Secondary or support level activities for Isaiah's muffin shop include the following:-

• Procurement:- How the shop is obtaining raw materials?
• Technology-Development:- It involves the newer scopes in the shop like how can we escalate the business leveraging the technology. In the shop, we can keep looking for the new flavor of cakes with superior taste.
• HRM:- It deals with hiring potential employees, retaining them & using them to build the market for your product.
• Infrastructure:- It deals with the shop's internal structure & its management which includes planning, financing, quality control, etc.