Business: Using the examples of the car and motoring industry, explain the difference between the chain and sector matrix analysis.
Chain analysis focuses on the competitive strength of a company, a matrix analysis focuses on the business and products that make up a company.
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").
Example from the automobile industry, the competitive strength of General Motors can be depicted by value chain analysis but its business and products can be shown with the help of a matrix analysis.
General Motors Corporation (GM) participates in the automotive industry through the activities of General Motors Automotive, which consists of four regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM) and GM Asia Pacific (GMAP). GMNA designs, manufactures and/or markets vehicles, primarily in North America under the following nameplates: Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, Saturn and Hummer. GME, GMLAAM and GMAP meet the demands of customers outside North America with vehicles under the following nameplates: Opel, Vauxhall, Holden, Saab, Buick, Chevrolet, GMC and Cadillac. GM's Financing and Insurance Operations primarily relate to General Motors Acceptance Corporation. It provides consumer vehicle financing, automotive dealership and other commercial financing, residential and commercial mortgage services, automobile service contracts, personal automobile insurance coverage and selected commercial insurance coverage.
Linking Value Chain Analysis to Competitive Advantage/Strenght
What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.
Primary value chain activities include:
Primary Activity Description
Inbound logistics All those activities concerned with receiving and storing externally sourced materials
Operations The manufacture of products and services - the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)
Outbound logistics All those activities associated with getting finished goods and services to buyers
Marketing and sales Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)
Service All those activities associated with maintaining product performance after the product has been sold
Support activities include:
Secondary Activity Description
Procurement This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers)
Human Resource Management Those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business
Technology Development Activities concerned with managing information processing and the development and protection of "knowledge" in a ...
This solution addresses the elements of chain and matrix analysis in 2000 words. Please note that there are a few gaps in the question. First, the sector matrix analysis is different from the chain matrix analysis but they are interrelated. Second, the question does not mention the purpose of differentiating between the two analysis. Third, the competitive strength of the companies depends to an extent on the sector wise division in the company itself but this competition is contingent on several other industry wise factors. Fourth, the question does not address the industry environment of the automobile industry but still wants you to give examples from the automobile industry.