Understanding Value Chain in Commercial Real Estate

By Published On: December 4, 20212.5 min read

Every product you see in the market today, be it a commercial real estate product or any other type, involves some sets of activities that took it from just an idea to the final product that gives the maximum benefit to the end consumer. The step-by-step process of business activities that transform a service or an idea into a marketable product is referred to as the value chain.

What Is a Value Chain?

A Value Chain is a business model that describes the different sets of activities involved in the creation of a product or service. From idea conception to procurement, staffing to inbound and outbound logistics, all are processes involved in a product’s or services value chain.

What Are the Components of a Value Chain?

The Value Chain is a business concept that is divided into five major components:

  1. inbound and outbound logistics
  2. marketing and sales, and service
  3. Other components such as human resources management
  4. technology
  5. company infrastructure development

Inbound Logistics

This involves logistic operations that involve internal handling and management of resources coming from external environments. This includes receiving raw materials, inventory management and warehousing.

Outbound Logistics

These involve operations that have to do with the delivery of outputs to consumers. Operations that involve storage, collection, and eventual distribution of products to consumers are all part of outbound logistics.

Marketing and Sales

Marketing and sales involve processes that boost the visibility of the product to the appropriate targeted customers. It involves activities such as advertising, branding, pricing, promotions, positioning and product promise.

Services

Service includes the sets of business activities that are aimed at enhancing customer satisfaction. These include improving product quality, customer support, and processes involved in increasing every customers’ lifetime value.

Operations

Operations involve the detailed sets of activities that are involved in converting a product from idea to raw materials and down to useful end-products.

How Does the Value Chain Work in Real Estate?

The Value Chain plays a very fundamental role in real estate projects. For instance, a commercial real estate project may begin with an architectural design and ongoing planning for the project. It is then followed by project management, facility management, raw materials allocation as assets, and an organizational strategy as processes that will convert input into outputs (the final project).

Procedures involving procurement of construction materials, receiving, and management are inbound logistics, and external transactions moving out are outbound logistics. Maintenance, incorporation of sustainability requirements such as green construction, low pollution during operations, use of energy-efficient materials are part of services that will ensure a consumer is satisfied with the products that they receive.

Operations involving sale and investment operations on the project form part of the marketing and sales activities.

The Final Value

Value Chain helps real estate projects increase business efficiency and help to boost a more competitive advantage that increases productivity and enhances more customer satisfaction. This can help businesses assess the value of their investment in people to enable them to optimize their business processes, reduce cost and increase profits.

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