The Value Chain

VALUE CHAIN DEFINITION

Index
  1. Porter’s value chain
  2. McKinsey’s value chain
  3. Services value chain
  4. The value system
  5. The competitive advantage

Value chain splits the activities of a company in a sequence of activities. Value chain analysis describes internal and external activities of an organization and relate them with its capacity to produce value added products and/or services. The ability to make some activities and to manage links between them is one of the sources of competitive advantage of organizations.
The most used value chains are those of Porter and McKinsey. However, a third value chain does exist, focused mainly on services.

  1. Porter’s value chain.
In his value chain, Porter makes a difference between primary and support activities.
Primary activities are directly linked to the creation or distribution of a product or service and are classified into 5 main groups:
    - Inbound logistics: reception, storage and distribution of raw materials needed to manufacture the products or services; it includes raw materials management, warehouse control, transportation, …
    - Operations: they transform raw materials into the final product or service: processing, assembly, packaging, control, …
    - Outbound logistics: picks up, stores and delivers the product or service to the customers.
    - Marketing and sales: gives the means for costumers or users to know the product or service and buy it. In these activities sales management, advertising, sales, … are included.
    - Services: They include all activities that add value to or keep the product or service value, such as installation, maintenance, training or spare parts.
Support activities help improve the efficiency and effectiveness of primary activities. They are divided into four groups:
    - Procurement: refers to all purchasing processes of the resources needed for primary activities.
    - Technology development: technology can be linked to the... [continues]

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