Value Chain

Porter proposed a general- purpose value chain that companies use to examine all of their activities, and show how they are connected. Value chain depicts the activities within and around an organization and relates them to an analysis of the competitive strength of the organization. It evaluates which value each particular activity adds to the organizations products or services. The way the value chain is performed determines costs and affects profit.
Porter’s value chain was divided into primary and support activities. Primary activities focus on the development and delivery of products or services. These primary activities are grouped into five main areas:
Inbound logistics- this activity relates to receiving, storing and distributing inputs internally. Your relationship with supplies is a key factor in creating value.
Operations- this activity deals with transforming inputs into outputs (products and services).
Outbound logistics- activities that deal with the collecting, storing and distribution of the outputs to customers.
Marketing and sales- this activity informs potential buyers about your product or service, and persuades them to buy it over competitor’s products or service.
Service- this involves maintaining the value of your products or services to your customers after it was sold and delivered.
Each of these primary activities is linked to support activities which help to improve their effectiveness and efficiency. There are four main support activities:
Procurement- is the acquisition of inputs, or resources it needs to operate; negotiating the best price.
Human resource management- consists of all activities involved in recruiting, hiring, training, developing, compensating, and dismissing or laying off personnel.
Technological development- relates to the equipment, software, procedures and technical knowledge brought to bear in the firm’s transformation of inputs and outputs.
Infrastructure- this is a company’s support system, and the