Q1. What is the Value Chain? Q2. Identify and discuss briefly three (3) Cost Drivers that may impact the costs incurred in the airline industry in the Caribbean. Provide appropriate examples to...

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Question 1
The value chain is a set of activities, which adds values to the product or service. Every step
of the process adds some kind of values to the products and this starts from the raw phase to
the phase where the finished product is obtained and distributed to the customer. Michael
Porter created the model of value chain in 1980 and highlights this value chain analysis in
book titled “Competitive Advantage (Sadler, 2003). The major significance of value chain is
to generate the competitive gain to the company. It can be understood with the fact that a firm
purchase a raw material then starts adding values to the material and finally developed a high
cost finished product. The process of creating values in regards to earn high profit at lower
cost and provide high value product to the customer results a significant competitive gain to
the firm. Porter’s value chain model consist two types of activities i.e. primary activities and
supportive activities. Primary activities contain the logistics (inbound and unbound),
operations, sales, advertisement- marketing, post-sale service (Modern, 2007). The supportive
activities of Porter’s value chain model are procurement, HRM, company’s infrastructure,
R&D.
Figure 1 - Primary and Support Activities of Porter's value chain model
A brief discussion about the primary and support activities is as highlighted below (Schneier,
2016).
Primary Activities:
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 Logistics (Inbound logistics) – This is an essential activity of value chain because it is
first step of any business action or system. It comprises the sub activities such as
collection of raw material, storage, distribution of the materials into various units.
 Operation - It involves the respective process steps that are required to convert the
material to finished product.
 Logistics (outbound logistics) – This activity is set of action applied to distribute the
finished product to buyers/ customers.
 Sales and Marketing – Promotion activities, advertising strategies, selection of suitable
price to the product or service, selection of population.
 Post-sale service – This part is considered one of the main factors to enhance the
customer satisfaction level and finally the value to the customer. Additional services, easy
repairing, effective training to the customer, free installation of the service or product,
warranty, replacement policies are the key factors in the post-sale service activity of the
value chain model of the Porter.
Support Activities:
 Procurement activity – This action is supportive activity of inbound logistics and involves
the acts of collecting the raw material at cheaper cost.
 Research and Development (R&D) – Selection of an effective, cost beneficial process for
business development is comes under the R&D support activity.
 HR source- Hiring of the suitable officers/ employees for the respective purpose of job
results the direct and indirect value addition to the product or service.
 Company’s infrastructure – It is not only comprise the building structure but also the
various planning, quality assurance team, managing the finance and so on.
Value chain analysis is imperative...