Value Chain Management
Value chain management and value creation
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Michael Porter described Value chain as the activities which a firm carries out in order to come up with a quality product that meets the consumer’s needs. Such activities include, research and development, product design, production of the product, marketing and selling the finished product to potential customers, distribution management and customer service which may include after sale services like repair and maintenance (Institute of Management Accountants, 1996).
Michael Porter further asserts that;
"The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or service) organization as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources - money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits."
While the above cannot be overemphasized, Value chain management basically ensures that a company continues to operate profitably which based on Porter’s Value Chain is described as “Creating Value”. Any company can create Value by producing products which can be bought by the large masses. The following activities according to Michael Porter, cuts across all businesses and are therefore necessary for value creation. They include; Primary Activities and Support activities.
Primary Activities
These activities are associated with the designing, production, sale and support offered to the consumer after purchasing the product. They include: Inbound logistics, Operations, Outbound logistics, Sales and Marketing and Service provision.
Support Activities
While they are basically carried out by the organization staff, these activities are at the core of organization as
Student Name, Class
University
Michael Porter described Value chain as the activities which a firm carries out in order to come up with a quality product that meets the consumer’s needs. Such activities include, research and development, product design, production of the product, marketing and selling the finished product to potential customers, distribution management and customer service which may include after sale services like repair and maintenance (Institute of Management Accountants, 1996).
Michael Porter further asserts that;
"The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or service) organization as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources - money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits."
While the above cannot be overemphasized, Value chain management basically ensures that a company continues to operate profitably which based on Porter’s Value Chain is described as “Creating Value”. Any company can create Value by producing products which can be bought by the large masses. The following activities according to Michael Porter, cuts across all businesses and are therefore necessary for value creation. They include; Primary Activities and Support activities.
Primary Activities
These activities are associated with the designing, production, sale and support offered to the consumer after purchasing the product. They include: Inbound logistics, Operations, Outbound logistics, Sales and Marketing and Service provision.
Support Activities
While they are basically carried out by the organization staff, these activities are at the core of organization as
References: Institute of Management Accountants, “ Value Chain Analysis For Assessing Competitive Advantage”1996. Michael E. Porter and Mark R. Kramer, “Creating Shared Value” Charles Green, “What Are the Six Requirements for Successful Value Chain Management?”