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Value Chain Definition Model Analysis and Example

A value chain is a series of steps that create value at each stage from initial design to delivery of a finished product to customers. It identifies where value is added during sourcing, manufacturing, and marketing. Conducting a value chain analysis helps increase production efficiency so a company can deliver maximum value at minimum cost. Key elements of a value chain include primary activities like operations, marketing, and service, as well as support activities such as procurement, technology, and human resources. The goal is to create a competitive advantage through increased productivity and reasonable costs.

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SR-Rain Daniel Espinoza
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223 views9 pages

Value Chain Definition Model Analysis and Example

A value chain is a series of steps that create value at each stage from initial design to delivery of a finished product to customers. It identifies where value is added during sourcing, manufacturing, and marketing. Conducting a value chain analysis helps increase production efficiency so a company can deliver maximum value at minimum cost. Key elements of a value chain include primary activities like operations, marketing, and service, as well as support activities such as procurement, technology, and human resources. The goal is to create a competitive advantage through increased productivity and reasonable costs.

Uploaded by

SR-Rain Daniel Espinoza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Value Chain: Definition,

Model, Analysis, and


Example

What is value
chain?
A value chain is a series of consecutive steps that go into
the creation of a finished product, from its initial design to
its arrival at a customer's door. The chain identifies each
step in the process at which value is added, including the
sourcing, manufacturing, and marketing stages of its
production.

A company conducts a value-chain analysis by evaluating


the detailed procedures involved in each step of its
business. The purpose of a value-chain analysis is to
increase production efficiency so that a company can
deliver maximum value for the least possible cost.
Key Pointers
A value chain is a step-by-step business model for
transforming a product or service from idea to
reality.
Value chains help increase a business's efficiency
so the business can deliver the most value for the
least possible cost.
The end goal of a value chain is to create a
competitive advantage for a company by
increasing productivity while keeping costs
reasonable.
The value-chain theory analyzes a firm's five
primary activities and four support activities.
Understanding
Value Chain
Because of ever-increasing competition for unbeatable
prices, exceptional products, and customer loyalty,
companies must continually examine the value they
create in order to retain their competitive advantage. A
value chain can help a company to discern areas of its
business that are inefficient, then implement strategies
that will optimize its procedures for maximum efficiency
and profitability.
History Of Value
Chain
Michael E. Porter, of Harvard Business School,
introduced the concept of a value chain in
his book, Competitive Advantage: Creating
and Sustaining Superior Performance. He
wrote: "Competitive advantage cannot be
understood by looking at a firm as a whole. It
stems from the many discrete activities a
firm performs in designing, producing,
marketing, delivering, and supporting its
product."
Conclusion
Components of a Value Chain
In his concept of a value chain,
Porter splits a business's activities
into two categories, "primary"
and "support," whose sample
activities we list below.1 Specific
activities in each category will
vary according to the industry.

Primary Activities
Primary activities consist of five components, and all are essential for adding value and creating
competitive advantage

Inbound logistics include functions like receiving, warehousing, and


managing inventory.
Operations include procedures for converting raw materials into a
finished product.
Outbound logistics include activities to distribute a final product to
a consumer.
Marketing and sales include strategies to enhance visibility and
target appropriate customers—such as advertising, promotion, and
pricing.
Service includes programs to maintain products and enhance the
consumer experience—like customer service, maintenance, repair,
refund, and exchange.
Support Activities
The role of support activities is to help make the primary activities more efficient.

Procurement concerns how a company obtains raw materials.

Technological development is used at a firm's research and


development (R&D) stage—like designing and developing
manufacturing techniques and automating processes.

Human resources (HR) management involves hiring and retaining


employees who will fulfill the firm's business strategy and help
design, market, and sell the product.

Infrastructure includes company systems and the composition of


its management team—such as planning, accounting, finance, and
quality control.
Thank you!

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