etap1

Step 1: Catalog Activities (The Value Chain)

In the remainder of this note, we employ an activity template, the value chain, that can guide managers in breaking down the firm into activities.²² The value chain divides all activities into two classes: primary activities that directly generate a good or service, and support activities that make the primary activities possible. Primary activities are broken down further into inbound logistics, operations, outbound logistics, marketing and sales, and after-sales service. Support activities include procurement of inputs, development of technology and human resources, and general firm infrastructure. Figure 6 shows the value chain of an Internet start-up that sells compact discs online and ships them by mail to customers.

Once activities have been cataloged, they must be analyzed in terms of cost and willingness to pay relative to the competition. To illustrate how this is done, we focus on a simple example: the snack cake market in the western region of Canada.^* Between 1990 and 1995, Betsy Baking grew its share of this market from a meager 1% to nearly 20%. At the same time, Collins Kitchen, the maker of such long­time favorites as Dinklets and Angel Dogs, saw its dominant 45% share dwindle to 25%. An analysis of relative costs and willingness to pay shows why Betsy Baking and Collins fared so differently.