Automobiles Industry Value Chain Analysis
Value chain covers the entire range of activities from the conception of the product to its final delivery into the hands of a customer. In case of the companies involved in the production of goods, there value chain begins from the acquisition of the raw materials. It consists of all the processes down the chain till finally the product is sold to the customers. All the processes down the value chain add value to the product till it is ready and sold. A value chain analysis helps analyse where there are problems down the value chain to make improvements. Generally a value chain analysis begins with the identification of the various processes that are a part of the production process.
After that issues can be found out to make improvements and increase the efficiency of the operations. Efficient value chain management helps at generating competitive advantage. Here is a value chain analysis of the automobile industry that outlines the various processes which are a part of its value chain. Some of the major names involved in the production of vehicles in the global market are General Motors, BMW, Ford, Toyota, Audi, Volkswagen and Hyundai. All these companies invest in value chain management since it enables them to save costs as well as generate competitive advantage.
The primary activities in the value chain of automobile industry are:
- Inbound logistics: This is the first step in the line of production. At the first step raw materials are received from the suppliers. The suppliers of this industry are scattered all over the world from US and Japan to Thailand and China. In this stage, the raw materials are received from the suppliers and distributed among the manufacturing units as per the requirement. The remaining raw material is stocked in the warehouses for later use.
- Operations: This is the second stage that covers the main production stage. However, it can be divided into several parts from the chassis to the final vehicle. Operation is basically the process of converting the raw materials into the product. Several of the major producers have their manufacturing units and operations scattered all over the world from Asia to Europe and America. It helps them save on costs related to manufacturing and shipping to the regional markets.
- Outbound logistics: It is the process of the final goods being moved out of the manufacturing units to the retailers. Several of the auto makers have their own showrooms and several operate through franchisees.
- Marketing and sales: Marketing is a very critical part down the value chain of the vehicle producing companies. This part includes promotions, advertising, distribution, sales force management, customer relationship management etc. The aim of this stage is to ensure that the product reaches the targeted consumer segment and that the target market is made aware of product features and advantages. The focus of marketing is also to drive up sales and profitability. The automobile companies spend a lot on advertising and marketing of their brands through the traditional and the online channels which is because of the increased competition in this field.
- Services: This is the final activity down the value chain that adds value to the product. It includes customer support after the sale of the product. After the product has been sold, the customers are provided continued support regarding the maintenance of their vehicles. Support activities also ensure customer retention. The better the customer support of any organization, the better its brand image and the higher its number of retained customers.
These were the primary activities. There are also support activities that support them and which include:
- Infrastructure: Organizational infrastructure has a key role in the success of a business. It includes the organizational structure, culture, management, finance and other resources. The better a firm’s infrastructure is managed, the higher is its ability to create profits.
- Human resource management: Despite everything being in place, nothing is possible unless the company has highly skilled professional to design and produce great vehicles. It is why HR management is an important focus area for all the vehicle brands. Well managed human capital and motivated employees are the key to success in the market. It is why organizations focus on all parts of HRM from recruitment to training and performance management.
- Technology : Technology plays a major role in the automobile industry right from stage one in its value chain to the final product’s marketing and sales. Infact, it is itself a major part of the technology industry. In the recent years more focus has been on passenger safety, vehicle design, emissions control and several other factors that are influenced by technology like rider convenience.
- Procurement: Procurement management is also an important support activity down the value chain of the automobile makers. It involves the procurement of raw materials from the suppliers. Managing this part helps at saving costs as well as ensuring good quality raw materials that can produce efficient and strong vehicles.