McManns,1999, p. 132). Such analysis will logically lead to improvements. According to Michael Porter, the proponent of Value Chain Analysis Theory, value chain is comprised of five primary activities and four support activities. According to Campbell, Stonehouse and Houston (2004, p. 43), primary activities are those that add value directly to the final product (or service) while the support activities indirectly add value by supporting the primary activities. The primary activities are inbound logistics, operations, outbound logistics, marketing & sales, and service.
With respect to Walt-Mart, inbound logistics refer to how merchandise is received and stored. Once goods arrive at the Wal-Mart warehouses, they have to be received and stored without any loss of time for the trucks or suppliers. Also, they have to be entered into databases quickly. Inventories pile up idly and attendant costs rise if the goods received are not quickly fed into the database. Outbound logistics refer to how goods are dispatched to the ultimate consumers. In Wal-Mart’s case, it means how the goods are delivered to the customer in a way that the customer is given the best comfort and convenience.
It also includes, more importantly, how conveniently stores are located to the best comfort of the customer. Operations, the third activity, refers to how services are (manufactured in case of products) provided. In Wal-Mart’ case, it connotes how the entire range of service-providing activities involved in helping a customer buy what he or she wants are done: comfortable store space, ambience, availability of goods in the customer-expected level of choice, toilets, entertainment, creche, counter-salesman’s help, hassle-free billing and so on.
Sales and marketing function includes the activities related to how products are chosen, how the stores are advertised, and how the goods are priced. Service includes all the activities targeted at satisfying both external customers and internal customers. The important service activity to external customers in Wal-Mart’s case is the way the goods returned are replaced or their cash-equivalent refunded. The four support activities are firm infrastructure, human resources, technology development and procurement.
The buildings, assets and the systems primarily form the firm’s infrastructure. Robust infrastructure facilitates the transactions and growth. Secondly, human resources -the work force engaged in every activity- makes or mars the business and its growth. In other words, unhappy, underpaid, overworked and discriminated work force undermines the productivity improvement measures- especially those related to dealing with customers and managing the inventory.
Technology development, the third support activity, is the processes involved in making new products, new processes, creating improved logistics systems and introducing IT-related systems. Technology, the methods of providing and delivering services as far as Wal-Mart is concerned, holds the key to its productivity and growth. Procurement, the fourth and last support activity, relates to the processes involved in ordering goods. How a company chooses its suppliers and how it involves them in the realization of the mission of the former makes a lot of difference to how the goods are supplied on time and at what cost.