Question
What is meant by moving-up the value chain? Explain with the help of an example.

Answer

"Moving-up the value chain' means using business processes and resources to produce highly profitable products. For every product that is sold, it has to pass through a series of steps before it is ready to be sold. Some of the stages that a product passes through are as follows:
  1. Research and development
  2. Raw materials purchase
  3. Manufacturing
  4. Sales and marketing
  5. Finished product delivery
  6. Wholesale provider
  7. Retail sale
  8. Delivery
  9. Installation
  10. After-sales support, etc.
At nearly all of these stages, value is added to the basic idea, which means that there is an opportunity for gaining a competitive edge. So, companies can expand by moving-up the value chain and increase their profits.
The activities of an organisation are classified as primary and support activities and value can be added to either of these activities, e.g. suppose a company runs a business of applying powder coating to bare metal components of machinery. Traditionally, it used to outsource the production of machining tools, but now it has employed a machinist and bought some basic machining tools thus, moving forward on the value chain. This allows him to have more control over the processes and increases his overall profit.

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