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Chapter 3 Strategy and Information Systems
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business processes that integrate the activities of all departments involved in a value chain. You
will see an example of a linkage in the next section.
Value chain analysis has a direct application to manufacturing businesses like the drone manu-
facturer. However, value chains also exist in service-oriented companies such as medical clinics. The
difference is that most of the value in a service company is generated by the operations, marketing
and sales, and service activities. Inbound and outbound logistics are not typically as important.

Q3-5 How Do Business Processes Generate Value?

A business process is a network of activities that generate value by transforming inputs into
outputs. The cost of the business process is the cost of the inputs plus the cost of the activities. The
margin of the business process is the value of the outputs minus the cost.
A business process is a network of activities. Each activity is a business function that receives
inputs and produces outputs. An activity can be performed by a human, by a computer system, or
by both. The inputs and outputs can be physical, like drone parts, or they can be data, such as a
purchase order. A repository is a collection of something; a database is a repository of data, and
a raw material repository is an inventory of raw materials. We will refine and extend these defini-
tions in Chapter 7 and again in Chapter 12, but these basic terms will get us started.
Consider the three business processes for a drone manufacturer shown in Figure 3-8. The
3
materials ordering process transforms cash into a raw materials inventory. The manufactur-
ing process transforms raw materials into finished goods. The sales process transforms finished
Figure 3-8 goods into cash. Notice that the business processes span the value chain activities. The sales pro-
Three Examples of Business cess involves sales and marketing as well as outbound logistics activities, as you would expect.
Processes

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