ITPEC FE Morning October 2019 Question 70
Which of the following is a technique for separating company activities into core activities and support activities for each business function, and analyzing which activities generate the profit derived from the products and services provided to customers?
Explanation
Value chain analysis — it splits a company's activities into primary and support activities and asks which of them create the value customers pay for.
Porter's value chain divides the business into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (firm infrastructure, human resource management, technology development, procurement). Analysing the cost and contribution of each shows where the margin, the profit, is generated and where competitive advantage lies.
Answer (d)
Why not others:
- •(a) — 3C analysis looks at Customer, Competitor and Company to find success factors in the market; it does not break down internal activities
- •(b) — five forces analysis measures an industry's profitability from rivalry, new entrants, substitutes and the bargaining power of buyers and suppliers
- •(c) — SWOT analysis sorts factors into internal strengths and weaknesses and external opportunities and threats
Key rule: To analyse the company's own activities, use the value chain; to analyse the industry, five forces; the market, 3C; and to combine internal and external factors, SWOT.
Business Strategy Management · AI-written, may contain errors
This question comes from an official ITPEC past paper. ITPEC Practice is an independent study tool and is not affiliated with ITPEC. See the official FE past-paper collection or Report an issue.