Value-Chain Analysis


WeWork value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the co-working giant. Figure below illustrates the essence of WeWork value chain analysis. WeWork Value Chain Analysis   WeWork Primary Activities WeWork Inbound logistics Generally, inbound logistics involve receiving and storing raw materials and using them for manufacturing. WeWork offers space as a service and as such its value chain analysis, including  inbound logistics are affected by the following main characteristics of service: a) Inseperability. In services production and consumption are simultaneous and they cannot be separated. b) Intangibility. Unlike products, services are intangible and they cannot be touched in physical terms. However, intangibility aspect of services relates to WeWork to a lesser degree compared to other types of services. This is because office spaces and furniture and appliances within offices are tangible items. c) Perishability. Services cannot be stored for the later use or sale. Certain number of desks of a co-working operator staying vacant during a certain period of time means waste and loss for the business. d) Heterogeneity. It is difficult to establish a standard for the quality of services. The quality of services is highly dependent on the perception of each individual user. Inbound logistics for WeWork involve finding suitable places for co-working offices and furnishing these offices as creative and attractive workspaces.    WeWork Operations Operations within value chain analysis refer to the process of transforming raw materials into products ready to sell. For service companies such as WeWork operations include the processes that make the services possible and deliver the experiences to consumers. WeWork operates a network of 756 locations in 38 countries as of December 2021[1]. The co-working giant attempts to design its offices and workspaces in a creative manner that…


February 23, 2023
By John Dudovskiy
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Starbucks value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage for the global coffeehouse chain. Figure below illustrates the essence of value chain analysis. Starbucks Value chain analysis   Starbucks Primary Activities Starbucks Inbound logistics Starbucks inbound logistics and supply chain was subjected to a dramatic restructuring in 2010 after Howard Schultz had returned to the role of CEO for the second time. The restructuring initiative of Starbucks inbound logistics involved simplification of supply-chain management and the creation of a single, global logistics system. Unroasted Arabica coffee beans are brought from Asia, Africa and Latin America to the US and Europe in containers via sea. Also, the coffee chain purchases green coffee beans from multiple coffee-producing regions around the world. These are delivered to one of the following regional roasting plants and distribution centres: Kent Flexible Roasting Plant – Kent, Washington. Augusta Roasting Plant – Augusta, Georgia. Sandy Run Roasting Plant – Gaston, South Carolina. York Roasting Plant and Distribution Center – York, Pennsylvania. Evolution Fresh Juicery – Rancho Cucamonga, California. Coffees are roasted and packaged and taken to dozens of central distribution centres around the globe. Along with coffees from regional distribution centres, central distribution centres also receive deliveries from vendors for a wide range of products starting from coffee machines to napkins. Central distribution centres make more than 70,000 deliveries per week to Starbucks 25,085 stores located in 75 countries.[1] The world’s largest coffeehouse chain also grows its own coffee. Since 2013 Starbucks has its first own 240-hectar coffee farm in PoasVolacno, Costa Rica.[2] Such a shift in the sourcing of products can increase the effectiveness of new product development initiatives for the business as the company will have a chance of experimenting with developing new sorts of…


October 8, 2022
By John Dudovskiy
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IKEA value-chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the global furniture retailer. “Each step in the manufacture of a product or the delivery of a service can be thought of as a link in a chain that adds value to the product or service. This concept of how business fulfils its mission and objectives is known as the value chain”[1]. Figure below illustrates the essence of IKEA value chain analysis. IKEA Value Chain Analysis IKEA Primary Activities IKEA Inbound logistics Inbound logistics for IKEA is associated with purchasing raw materials and ready items from about 1220 suppliers located in more than 55 countries worldwide.[2] The majority of IKEA products (89%) are sourced from external suppliers across the globe.[3] The world’s largest furniture retailer conducts purchasing via its 31 trading service offices in 26 countries. The top five purchasing countries for The Swedish furniture chain include China 20%, Poland 18%, Italy 8%, Germany 6% and Sweden 5%.[4] IKEA inbound logistics is a major source of value creation for the business. Specifically, the proximity of company’s 31 trading service offices to supplier locations helps to ensure that company can monitor production, test new ideas, negotiate prices and check quality of products and raw materials they are buying. Economies of scale are another factor that decreases the prices of inbound logistics for the furniture retailer.  Moreover, flat pack Do-It-Yourself assembly principle for many IKEA products lowers the cost of packaging and makes inbound logistics easier to facilitate. The world’s largest furniture retailer maintains strategic relationships with its suppliers. The average length of supplier relationship is 11 years[5], with some suppliers working with IKEA for several decades.   IKEA Operations IKEA operations are divided into three divisions – Franchise, Property and…


August 17, 2022
By John Dudovskiy
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Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. The figure below illustrates the essence of McDonald’s value chain analysis. McDonald’s value chain analysis   McDonald’s Primary Activities McDonald’s Inbound logistics McDonald’s inbound logistics involves receiving and storing raw materials and using them to produce its burgers and other items in the menu. Raw materials for the fast food chain include meat, raw vegetables, ketchup, mayonnaise, napkins etc. Economies of scale are the main source of value creation in McDonald’s inbound logistics. The fast food giant has been pursuing backwards vertical integration strategy. This strategy involves companies to expand their roles and capabilities to complete tasks formally fulfilled by other companies in their supply chain. Specifically, McDonald’s “grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own.”[1] Backward vertical integration strategy allows the fast food chain to control the quality of their ingredients and reduce the costs of supply.   McDonald’s Operations McDonald’s operates more than 40,000 company-owned and franchised restaurants. As of December 2021 in total 37,295 stores, or 93%, were franchised[2]. McDonald’s franchise restaurants have one of the following formats: conventional franchise, developmental license or affiliate.[3] Conventional franchising involves franchisees paying rent and royalties on the percentage of sales along with the payment of initial fees when opening a new restaurant. In this type of franchising, McDonald’s Corporation owns the land and building or secures a long-term lease for the restaurant location and the franchisee pays for equipment, signs, seating and décor.[4] Developmental license involves licensees providing capital for the entire business, including the real estate interest.[5] In developmental license…


June 23, 2022
By John Dudovskiy
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Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. Figure below illustrates the essence of Amazon value chain analysis. Amazon Value chain analysis   Amazon Primary Activities Amazon Inbound logistics Inbound logistics within Amazon value chain analysis involve receiving and storing raw materials to produce goods and services. Due to massive global scope of its operations the e-commerce giant maintains complex, but sophisticated inbound logistics operations. Generally, Amazon does not have long-term contracts or arrangements with its vendors to guarantee the availability of merchandise, particular payment terms, or the extension of credit limits. Fulfilment by Amazon (FBA) is the cornerstone of Amazon inbound logistics for company-owned retail business. Moreover, the economies of scale is an important source of value creation for Amazon inbound logistics. Sellers can also use FBA by stowing their inventory in Amazon fulfilment centres. In this case, Amazon assumes full responsibility for logistics, customer service, and product returns. If a customer orders an FBA item and an Amazon owned-inventory item, the company ships both items to the customer in one box, as a significant gain of efficiency. The use of FBA is an optional choice for sellers and this choice makes the products of third-party sellers eligible for Amazon Prime free two-day shipping, free shipping and other benefits. Amazon uses logistics beyond the point to serve Amazon Marketplace and starting from recently, the company has been offering logistics services to third parties. For example, Beijing Century Joyo Courier Services, an Amazon subsidiary registered with the U.S. government as an ocean shipping provider.[1] From this point of view, efficient logistics infrastructure also belongs to the list of Amazon competitive advantages.   Amazon Operations Operations generally comprise the process of transforming raw materials into goods…


March 25, 2022
By John Dudovskiy
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Value chain analysis is a strategic analytical tool that can be used to identify business activities that create the most value. The framework divides business activities into two categories – primary and support. The figure below illustrates the essence of Square value chain analysis. Square Value Chain Analysis   Square Primary Activities Square Inbound logistics Inbound logistics refers to receiving and storing raw materials for their consequent usage in producing products and providing services. Along with a wide range of financial services, Square offers related hardware products such as card readers, stands, terminals, registers, hardware kits and accessories. The majority of hardware products are produced in China. Accordingly, cost-effectiveness of producing hardware products is the main source of value creation in inbound logistics for Square.    Square Operations Square operations are divided into the following two segments: 1. Seller ecosystem. An expanding ecosystem of products and services that are designed to assist sellers to start, run and grow their businesses. In 2019 this segment processed USD106.2 billion of Gross Payment Volume (GPV), which was generated by nearly 2.3 billion card payments from 407 million payment cards.[1] 2. Cash ecosystem. This segment centred on Cash App integrates financial products and services that help individuals manage their money. As of December 2019, Cash App had approximately 24 million monthly active customers who had at least one transaction in any given month.[2] The main source of value creation in operations primary activity for Square refers to high level of speed and convenience of products and services enabled by technology. The finance sector disruptor spotted demand in both segments and developed products and services to satisfy demand with the use of the latest technology.   Square Outbound Logistics Outbound logistics involve warehousing and distribution of products.  Square uses the following distribution channels to distribute…


September 30, 2021
By John Dudovskiy

Uber Value chain analysis is a strategic analytical tool that helps to identify the sources of value and competitive advantage for the global transportation technology company. Figure below illustrates the essence of Uber value chain analysis. Uber Value Chain Analysis Uber Primary Activities Uber Inbound logistics Generally, inbound logistics involves receiving and storing raw materials. Uber, the largest taxi technology company in the world, does not own the vehicles it uses to serve customers. The vehicles are owned or rented by Uber drivers, who are not employees, but independent contractors. Uber drivers need to possess smartphones to use Uber app software. Uber users, i.e. customers also must have access to a smartphone or mobile website to be able to use the service. Accordingly, value addition in Uber inbound logistics relates to internet-based nature of business operations and the business model of the company. Specifically, thanks to its business model, despite the large size of the business, Uber inbound logistics is only limited to mainly hardware and office equipment needed to sustain the business. The global transportation technology company does not need to procure any raw material for provide its services.    Uber Operations Uber operations are highly sophisticated and customer-centric thanks to its app equipped with advanced functions and capabilities. Therefore, it can be argued that Uber app is one of the main sources of value in Uber operations. Uber operates in approximately 10000 cities worldwide. Business operations are divided into four reportable segments: 1. Mobility. In Mobility segment Uber operations consist of connecting consumers with independent providers of ride services. The usage of Uber mobility services involves the following stages: a) Requesting the ride. Customers can use Uber app to tap each ride option to see wait time, driver’s rating, and price. Customers can enter their pickup location and…


July 21, 2021
By John Dudovskiy
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Tesla value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the electric automaker. Figure below illustrates the essence of Tesla value chain analysis. Tesla value chain analysis Primary Activities in Tesla Value Chain Analysis Tesla Inbound logistics Tesla inbound logistics involves the receipt and storage of raw materials to build electric vehicles, energy storage systems and solar panels. Along with a standard set of raw materials, Tesla uses a range of scarce materials such as aluminium, steel, cobalt, lithium, nickel and copper. In the US, the company receives parts at its Fremont automotive factory from thousands of suppliers worldwide, including from its very own Gigafactory in Sparks, Nevada. The electric automaker leases three warehouses totalling a massive 1.3 million square feet in the Oaks Logistics Centre in Livermore, California., just 20 miles northeast of the Fremont factory as a storage for raw materials. Additionally, in 2019, Tesla constructed 870,000-square-foot facility in Lathrop, California as a massive spare parts storage.[1] Currently, highly sophisticated inbound logistics practices are not one of the main sources of value creation for the electric automaker. Tesla works primarily on a build-to-order basis, which means bottlenecks in parts supply could be a big headache.[2] Accordingly, it is critically important for Tesla to establish long-term strategic relationships with suppliers.   Tesla Operations Tesla conducts vehicle manufacturing and assembly operations at its facilities in Fremont, California; Lathrop, California; Tilburg, Netherlands and Shanhhai, China. Generally, Tesla operations can be divided into two segments: 1. Automotive. This segment comprises design, development, manufacturing, and sales of electric vehicles. The company produced and delivered approximately half a million vehicles in 2020.[3] The electric automaker started Model Y production at Gigafactory Shanghai in December 2020. The table below illustrates annual production capacities…


April 29, 2021
By John Dudovskiy
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Apple value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. Figure 1 below illustrates the essence of Apple value chain analysis. Figure 1 Apple Value Chain Analysis Apple Primary Activities Apple Inbound logistics Inbound logistics primary activity refers to receiving and storing of raw materials for their consecutive use in manufacturing. Apple works with hundreds of suppliers around the globe and maintains a highly sophisticated supply-chain management as illustrated in Figure 2 below. Figure 2 Apple operations roadmap[1] Although the tech giant does not apply Just-in-Time principle in inbound logistics, Apple supply chain practices is a benchmark for efficiency for global businesses. The multinational technology company’s purchase commitments typically cover its requirements for periods up to 150 days[2]. CEO Tim Cook is known for his strategy of getting suppliers to compete with each-other and he has reduced the numbers of suppliers considerably after becoming CEO in 2011. The main sources of value in Apple inbound logistics relate to the economies of scale due to the massive scope and scale of business operations as discussed below and the development of strategic relationships with suppliers. Moreover, Apple Inc. exercises an immense bargaining power in dealing with its suppliers and as a result, the company is able to secure cost advantage in the purchase of resources.   Apple Operations Apple does not own any manufacturing facilities and prefers to outsource manufacturing of its hardware to other companies in developing countries, notably China. While this strategy provides advantages such as focus on core competence of the business such as research and development and designing new products, it also has disadvantages. Specifically, outsourcing makes the company brand image vulnerable to labour issues at supplier facilities which has been the case with…


February 23, 2021
By John Dudovskiy
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W.W. Grainger value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage for global MRO products distributor. Figure below illustrates the essence of Grainger value chain analysis. W.W. Grainger Value chain analysis   Grainger Primary Activities Grainger Inbound logistics Grainger inbound logistics involves receiving and storing MRO products by the global industrial supply company in its distribution centres for subsequent shipment to customers. The worldwide distributor of industrial products purchases approximately 1,7 million types of MRO products from approximately 5000 suppliers worldwide and stores them in distribution centres. Economies of scale is a major source of value creation in inbound logistics for the global industrial supply company.  Additionally, the B2B distributor benefits from its strategic relationships with its suppliers in general and key suppliers in particular.   Grainger Operations Grainger operations are divided into the following three segments: 1. United States segment. This segment generated sales of USD 8,6 billion in 2018, 72% of total revenue of the company.[1] The industrial supply company divides its customers in US segment into two categories according to complexity of their needs.  a) Large customers in the US. Customers in this segment have complex needs and require services at their place of business. Grainger source of value creation in dealing with large customers in the US include adoption of partnership approach and assisting customers to reduce total cost of ownership in MRO spend by helping them to manage their labour, product and inventory costs. b) Medium customers in the US. This customer segment has less complex needs compared to large customers. Moreover, medium or mid-size customers in the US are mainly concerned with the solutions of their immediate business problems. Ranges and prices of products can be specified as major source of value creation…


August 20, 2020
By John Dudovskiy
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