Value Chain Analysis is another tool that may prove useful during the consulting case interview. It can be used to analyse the cost structure of a company as part of a declining profitability case, or to analyse the supply chain as part of an operations case.
To understand which activities provide a company with a competitive advantage, either through cost advantage or product differentiation, it is helpful to separate operations into a series of value-generating activities referred to as “the value chain”.
Value Chain Analysis involves identifying all of the important activities in which a company engages and then determining which ones give the company a competitive advantage. By doing this, a company can:
- Determine which activities are best undertaken internally and which ones are able to be outsourced or eliminated;
- Identify and compare strengths and weaknesses with the competition; and
- Identify synergies between activities.
The primary value chain activities include:
- Inbound Logistics: Receiving and storing raw materials;
- Operations: Manufacturing products and services; the way in which inputs are converted into final products;
- Outbound Logistics: Inventory storage and distribution to customers;
- Marketing & Sales: Identification of customer needs and preferences, marketing and sales generation;
- Service: Interacting with and supporting customers.
[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]