Value Chain Model
The 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 organi- zation performs and links them to the organizations competitive position.
Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each par- ticular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform par- ticular activities and to manage the linkages between these activities is a source of competitive advan- tage. Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or effi- ciency. There are four main areas of support activities: procurement, technology development (includ- ing R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).
The basic model of Porters Value Chain is as follows:
Support
Activities
Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Logistics
Operations
in rg Ma
Outbound Logistics
Marketing and
Sales
Service
rg
in
Ma
Primary
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 organi- zation performs and links them to the organizations competitive position.
Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each par- ticular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform par- ticular activities and to manage the linkages between these activities is a source of competitive advan- tage. Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or effi- ciency. There are four main areas of support activities: procurement, technology development (includ- ing R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).
The basic model of Porters Value Chain is as follows:
Support
Activities
Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Logistics
Operations
in rg Ma
Outbound Logistics
Marketing and
Sales
Service
rg
in
Ma
Primary