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).