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Value Chain Analysis

Value Chain Analysis, introduced by Michael Porter, examines the activities an organization performs to enhance its competitive position. It categorizes these activities into primary activities, such as inbound logistics and marketing, and support activities, like procurement and technological development. This analysis helps identify areas for cost reduction and product differentiation, ultimately aiding in strategic decision-making and improving customer satisfaction.

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Manju Pathania Biswas
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43 views7 pages

Value Chain Analysis

Value Chain Analysis, introduced by Michael Porter, examines the activities an organization performs to enhance its competitive position. It categorizes these activities into primary activities, such as inbound logistics and marketing, and support activities, like procurement and technological development. This analysis helps identify areas for cost reduction and product differentiation, ultimately aiding in strategic decision-making and improving customer satisfaction.

Uploaded by

Manju Pathania Biswas
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 PPTX, PDF, TXT or read online on Scribd
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Value Chain Analysis

Value Chain
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive
Advantage: Creating and
Sustaining superior Performance" (1985).

The value chain analysis describes the activities the organization performs and links
them to the organizations competitive position.

All of the activities that make up a firm's value chain can be


split into two categories that contribute to its margin:
primary activities and support activities.
Primary Activities
Primary activities are those that go directly into the creation of a product or the execution of a
service, including:

1. Inbound logistics: Activities related to receiving, warehousing, and inventory management of


source materials and components

2. Operations: Activities related to turning raw materials and components into a finished product

3. Outbound logistics: Activities related to distribution, including packaging, sorting, and shipping

4. Marketing and sales: Activities related to the marketing and sale of a product or service,
including promotion, advertising, and pricing strategy

5. After-sales services: Activities that take place after a sale has been finalized, including
installation, training, quality assurance, repair, and customer service
Secondary Activities
Secondary activities help primary activities become more efficient—effectively creating a
competitive advantage—and are broken down into:

1. Procurement: Activities related to the sourcing of raw materials, components, equipment,


and services

2. Technological development: Activities related to research and development, including


product design, market research, and process development

3. Human resources management: Activities related to the recruitment, hiring, training,


development, retention, and compensation of employees

4. Infrastructure: Activities related to the company’s overhead and management, including


financing and planning
Value Chain Analysis
Assessing various activities within a company's value chain to identify potential areas for
enhancement.

Conducting a value chain analysis encourages to evaluate how each step contributes to or reduces
from the final product or service

• Cost reduction by enhancing the efficiency of value chain activities, thereby lowering expenses.

• Product differentiation by allocating more time and resources to areas like research and
development, design, or marketing to make the product stand out.

In addition to optimizing budgets and establishing competitive advantage, businesses can also use value chain
analysis for:
SCM, Strategic decision making, Improving customer satisfaction, Innovation & Development, Environmental &
social impacts.
3 steps to Value Chain Analysis

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