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The Value Chain

he value chain can be defined as a series of activities that an organisation performs to deliver a valuable product or service to the market.

Porter, who introduced the concept, states that a generic value chain consists of five primary activities and four support activities:

Primary activities:

  • Inbound logistics: Receiving, storing and distributing raw materials.
  • Operations: Transforming raw materials into finished products.
  • Outbound logistics: Distributing finished products to customers.
  • Marketing and sales: Activities aimed at encouraging customers to purchase the product.
  • Service: Activities that maintain and enhance the product’s value after the sale.

Support activities:

  • Procurement: Purchasing raw materials and other supplies.
  • Product and technology development: Improving products and processes.
  • Human resource management: Recruiting, training and developing employees.
  • Firm infrastructure: Overarching functions such as management, finance and quality assurance.

These activities are designed to help organisations analyse and optimise their processes to gain a competitive advantage by maximising value and minimising costs at each stage of the value chain.

Source:
Competitive Advantage: Creating and Sustaining Superior Performance, 1985, Michael Porter (Professor at Harvard Business School)

Alternative Meanings:
  • The Value Chain

    The Value Chain can be defined as a series of activities an organization carries out to deliver a valuable product or service to the market.

    Porter, who introduced the concept, identifies a generic value chain as consisting of five primary activities and four support activities:

    Primary Activities:

    • Inbound Logistics: Receiving, storing, and distributing raw materials.
    • Production: Transforming raw materials into finished products.
    • Outbound Logistics: Distributing finished products to customers.
    • Marketing and Sales: Activities aimed at persuading customers to purchase the product.
    • Service: Activities that maintain and enhance the product’s value after the sale.

    Support Activities:

    • Procurement: Acquiring raw materials and other inputs.
    • Technology Development: Improving products and processes.
    • Human Resource Management: Recruiting, training/education and developing employees.
    • Firm infrastructure: General functions such as management, finance and quality assurance.

    These activities help organizations analyse and optimize their processes in order to gain a competitive advantage by maximizing value and minimizing costs at each stage of the value chain.

    Source:
    "Competitive Advantage: Creating and Sustaining Superior Performance", 1985, Michael Porter (professor at Harvard Business School).