Paper Example on the Concept of Value Chain

4 pages
1085 words
Boston College
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Critical thinking
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Value chain is often used to refer to the entire management of production activities (Gokus, 2015). It is used to manage the movement of goods within the firm from the time raw materials get into the organization to the stages of adding value to the goods up to the final product. Through value chain, the management is able to assess its value or production as well as analyze its costs and profitability.

Michael Porter introduced this term in 1895 in his analysis of competitive advantage and strategies of competition (Parida, Sjodin, Lenka & Wincent, 2015). Porter stated that firms need to integrate all its activities to be competitive. Value chain thus brings together all the functional departments of the firm to work together.

Value Chain Strategies of SFDA

Saudi Food and Drug Authority has an effective value chain plan that gathers for both the primary and the secondary activities of production of the firm. The management of SFDA has categorized its activities as either primary or support in order to monitor them easily and effectively. As a manufacturer, the firm applies the Michael porters models of competitive advantage to add value to its production.

The process begins with inbound logistics. This part of the value chain monitors the raw material part of the process. It manages the reception, storage and the distribution of raw materials into the various sections of the firm (Grant & Jordan, 2015). SFDA sources its raw materials from different regions and must ensure that they have an adequate amount of these materials. The management has developed effective reorder strategies that ensure that the firm stocks the right amount of raw materials such that losses can be minimized. The second section involves the management of operations. In this stage, the raw materials are input into the production and converted to usable drugs and food substances. It ensures that the right mixtures are availed for the manufacturing processes.

Outbound logistics is concerned with the distribution of the final outputs of production. At SFDA, the final products are food substances and drugs (George, 2014). The last stage of the value chain ensures that the right products in terms of quality and amount are produced. At this section, there are other subunits that deal with the final products. The quality assurance processes check on the quality of food and the drugs (Bidgoli, 2010). There are requirements for each product and thus the outbound logistics section assesses these need. Further, the firm is committed to serving the right well to the public. This section also assesses the market dynamics and advice on matters relating to the amounts of good to be produced.

The sales and marketing strategies of the firm connect the organization with the market. This stage is majorly concerned with the promotion of the firms goods. It seeks to let the public know about the products offered by the firm through conducting sales promotions, pricing, and advertising the final products. They also make decisions relating to pricing of the products and selecting the channel of distribution to use.

The management coordinates these processes through an effective value chain management system. These processes are dependent on each other and thus the efficiency of the organization is a function of the effectiveness of all the stages of production (Clarke & Boersma, 2017). The firm manages the primary functions of the firm through other support programs such as technology, human resource, infrastructure, and procurement. SFDA has integrated some of the latest technological processes in its management to assess its operations. Through its site, SFDA enhances the market for its products. It also adds value to management and communication of various stakeholders within the firm.

SFDA has quality and professional human resource (Anandajayasekeram & Gebremedhin, 2009). The firm sources its personnel worldwide to ensure that they get the right and professional employees to work. They also manage their employees effectively and ensure that they are satisfied (Sato & Stehrer, 2015). The management has effectively used its workers to add value to its supply chain.

Delivery of the Value Chain of SFDA

Saudi Food and Drug Authority has an effective and efficient value chain that is able to deliver positive results. The chain ensures that the firm operates efficiently while also cutting down the costs of management. The firm has enhanced the performance of its stages to effectively monitor their performance. While integrating this value chain, the objectives of the firm are to reduce the management costs and increase its efficiency. The current system, therefore, meets these objectives and thus is able to deliver (Reese, Waage, Gerwin, Koch & Nomos, 2016). The level of delivery of the systems is however affected by other management procedures. The management must always support these systems and have the right personnel to execute all the functions of the systems and the organization.

Success Strategies

For SFDA to further enhance their performance and delivery of its value chain, the firm needs to fully automate its value chain procedures. This involves having more technological systems working in the firm to help in the management of the various processes and activities of the organization (Schmitz, 2005). The firm also needs to have the right procedures that support the value chain strategies. The firm needs to have the right infrastructure that will support the technology systems in place. Further, there is need to have more professional employees that can use the systems effectively to increase the firm's value chain outcomes.


Anandajayasekeram, P., &Gebremedhin, B., (2009). Integrating Innovation Systems Perspective and Value Chain Analysis in Agricultural Research for Development: Implications and Challenges. ILRI (aka ILCA and ILRAD).

Bidgoli, H. (2010). The handbook of technology management. Hoboken, N.J: John Wiley & Sons.

Clarke, T., &Boersma, M., (2017). The governance of global value chains: unresolved human rights, environmental and ethical dilemmas in the Apple Supply Chain. Journal of business Ethics, 143 (1), 111 131.

George, B. (2014). Apple Value Chain analysis. Munich: GRIN Verlag GmbH.

Gokus, O., (2015). The moderating roles of company structure and external environment on market orientation and business strategy types. Academy of marketing studies journal, 19 (3).

Grant, R., M., & Jordan, J., (2015).Foundations of strategy 2nd Edition. Hoboken, NJ: John Wiley & sons.

Parida, V., Sjodin, D., R., Lenka, S., &Wincent, J., (2015). Developing global service innovation capabilities. Research technology management, 58 (5), 35.

Reese, J., Waage, M., Gerwin, K., Koch, S., &Nomos, V., (2016). Value Chain Analysis: Conceptual Framework and Simulation Experiments.

Sato, K., &Stehrer, R., (2015). New industry level analysis on value chains and competitiveness in Asia and Europe: introduction. Asia economic journals, 29 (2), 93-97.

Schmitz, H. (2005). Value chain analysis for policy-makers and practitioners. Geneva: International labour office (ILO.

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