‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Porter’s Value Chain Analysis This article explains the Porter’s Value Chain Analysis, developed by Michael Porter in a practical way. After reading you will understand the basics of this powerful management tool. This article also contains a downloadable and editable Porter's. Value Chain Analysis template. What is a Value Chain Analysis? The value chain also known as Porter’s Value Chain Analysis is a business management concept that was developed by Michael Porter. In his book Competitive Advantage (1985), Michael Porter explains that a value chain is a collection of activities that are performed by a company to create value for its customers. Value Creation creates added value which leads to competitive advantage. Ultimately, added value also creates a higher profitability for an organization. What is the Porter’s Value Chain Analysis Model? The strength of the Porter's Value Chain Analysis is its approach. The Porter's Value Chain Analysis focuses on the systems and activities with customers as the central principle rather than on departments and accounting expense categories. It links This website makes use of cookies to enhance browsing experience and provide additional functionality. Accept Read more hitps ww toolshero.com/managementivalie-chain-analysis-porer 19‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero systems and activities to each other and demonstrates what effect this has on costs and profit. Consequently, the Value Chain Analysis makes clear where the sources of value and the losses can be found in the organization Porter's Value Chain Analysis toolshero ted Pee aca ca Supporting activities Poo Ee ees ere tT ered Pee Primary activities The Value Chain activities Porter's Value Chain Analysis consists of a number of activities, namely primary activities and support activities. Primary activities have an immediate effect on the production, maintenance, sales and support of the products or services to be supplied. These activities consist of the following elements: Inbound Logistics These are all processes that are involved in the receiving, storing, and internal HRIRUURD ALLE RU ORIREALS HOARD DAERAIERSS RhALMIAAMELAL SBGKIGH aI MEtionality, relationship with the suppliers is essential tadbe sauzation of value in this matter. hitps ww toolshero.com/managementivalie-chain-analysis-porer 29‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Production These are all the activities (for example production floor or production line) that convert inputs of products or services into semi-finished or finished products. Operational systems are the guiding principle for the creation of value. Outbound logistics These are all activities that are related to delivering the products and services to the customer. These include, for instance, storage, distribution (systems) and transport. Marketing and Sales These are all processes related to putting the products and services in the markets including managing and generating customer relationships. The guiding principles are setting oneself apart from the competition and creating advantages for the customer. Service This includes all activities that maintain the value of the products or service to customers as soon as a relationship has developed based on the procurement of services and products. The Service Profit Chain Model is an alternative model, specific designed for service management and organizational growth. ies of the Value Ch: Support activities within the Porter's Value Chain Analysis assist the primary activities Support activi Analysis and they form the basis of any organization. In the figure dotted lines represent linkages between a support activity and a primary activity. A support activity such as human resource management for example is of importance within the primary activity production but also supports other activities such as service and outbound logistics Firm infrastructure This concerns the support activities within the organization that enable the organization to maintain its daily operations. Line management, administrative handling, financial management are examples of activities that create value for the Grigarabaittomakes use of cookies to enhance browsing experience and provide additional functionally. Accept Read more . hitps ww toolshero.com/managementivalie-chain-analysis-porer 39‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Human resource management This includes the support activities in which the development of the workforce within an organization is the key element. Examples of activities are recruiting staff, training and coaching of staff and compensating and retaining staff. Technology development These activities relate to the development of the products and services of the organization, both internally and externally. Examples are IT, technological innovations and improvements and the development of new products based on new technologies. These activities create value using innovation and optimization. Procurement These are all the support activities related to procurement to service the customer from the organization. Examples of activities are entering into and managing relationships with suppliers, negotiating to arrive at the best prices, making product purchase agreements with suppliers and outsourcing agreements. Organizations use primary and support activities as building blocks to create valuable products, services and distinctiveness. Using the Porter’s Value Chain Analysis Porter's Value Chain Analysis: There are four basic steps that have to be followed if you wish to use the Value Chain as an analysis model. By following these basic steps the organization can be analyzed using the Value Chain. Step 1: identify sub activities for each primary activity For each primary activity, sub-activities can be determined that create a specific value for an organization. There are three categories of sub activities, namely: + Direct activities (for instance online sales from Marketing& sales) This wRRSeOIaKeR Mtieg! Cerias tartobaree Play Ine GRIVPOPE Nd Ate” He eA NTN fingeonality. sales or organizing a golf tournéereht ReasuBesmers) sey hitps ww toolshero.com/managementivalie-chain-analysis-porer 49‘2072000 \Watis Porter's Value Chain Analysis? Deiniton & tampa |tooishero + Quality assurance (Proofreading and editing advertisements from Marketing& sales). Step 2: identify sub activities for each support activity Here it concerns the idea how support activities such as firm infrastructure, human. resource management, technology development and procurement can create value within the primary activities. Use the same distinction as in step 1 for direct and indirect activities and quality assurance. For example, consider how human resource management can create value to inbound logistics, marketing & sales and service This will also have to be done for the other support activities. Step 3: identify links This is a crucial and time-consuming step because this is about finding the links between all the different kinds of added value you have identified. This part is of importance for an organization when it concerns increasing competitive advantage from the value chain. For example, a development within a CRM solution can have a link with increasing production and sales volumes through certain investments. Another example is the link between the complaints that have been recorded within the primary activity service and the increase of unfilled vacancies (human resource management) within the primary activity outbound logistics. Step 4: look for opportunities/ solutions to optimize and create value After you have completed the value chain analysis it is important to determine what activities are to be optimized in order to create added value. This is about quantitative and qualitative investments that can eventually contribute to increasing your customer base, competitive advantage and profitability. Creating business cases will help you give priority and return on investment (ROI) to the possibly required added value creation of a primary or support activity. Porter’s Value Chain Analysis template Start listing the activities which add value to the organization with this ready to use This website makes use of cookies to enhance browsing experience and provide additional functionality Value Chain Analysis template. Accept Read more sy hitps ww toolshero.com/managementivalie-chain-analysis-porer 59‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Download the Porter’s Value Chain Analysis template Become a toolshero community member today. Already member? Login here. It’s Your Turn What do you think? How do you apply the Porter's Value Chain Analysis in your work? Do you recognize the practical explanation or do you have more additions? What are your success factors for the good Value Chain Analysis set up? Share your experience and knowledge in the comments box below. If you liked this article, then please subscribe to our Free Newsletter for the latest posts on models and methods. You can also find us on Facebook, LinkedIn, Twitter and YouTube. More information 1. Porter, M. E. (1985). Competitive advantage: creating and sustaining superior performance. Nova Science Publishers. 2. Porter, M. E. (2001). The value chain and competitive advantage. Understanding Business Processes. Routledge. 3. Porter, M. E. & Millar, V. E. (1985). How information gives you competitive advantage. How to cite this article: Van Viiet, V. (2010), Porter’s Value Chain Analysis, Retrieved [insert date] from ToolsHero: https:/Awww.toolshero.com/management/value-chain-analysis-porter/ This website makes use of cookies to enhance browsing experience and provide additional functionality Accept Read more icy hitps ww toolshero.com/managementivalie-chain-analysis-porer 39‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Add a link to this page on your website: ToolsHero.com: Porter’s Value Chain Analysis Did you find this article interesting? Your rating is more than welcome or share this article via Social media! kkk Average rating 5/5. Vote count: 2 RELATED STORIES Teece’s Win-Lose Innovation Model JANUARY 23, 2020 Porter's Generic Strategies MAY 10, 2018 Michael Porter DECEMBER 8, 2013 YOU MAY ALSO LIKE This website makes use of cookies to enhance browsing experience and provide additional functionality Accept Read more hitps ww toolshero.com/managementivalie-chain-analysis-porer 79‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Cog! DECEMBER 15, 2020 e Restructuring (CR) Responsibility Assignment Matrix (RAM) OCTOBER 29, 2020 This website makes use of cookies to enhance browsing experience and provide additional functionality Accept Read more hitps ww toolshero.com/managementivalie-chain-analysis-porer a9‘2190/2020, \Whatis Porters Value Chain Analysis? Defnion & template | toolshero Public Information Model OCTOBER 19, 2020 This website makes use of cookies to enhance browsing experience and provide additional functionality Accept Read more hitps ww toolshero.com/managementivalie-chain-analysis-porer 99