Value Chain

A value chain encompasses all the activities a company performs to produce a product or service, starting from the initial idea to the final delivery to customers. By evaluating each phase—from procurement and production to marketing and sales—a business can pinpoint areas to enhance value and reduce expenses, ultimately gaining a competitive edge.

Michael Porter's value chain framework divides a company's operations into two categories: primary and support activities. Primary activities are those that directly contribute to the creation and distribution of a product, whereas support activities facilitate these processes. These five fundamental functions are vital for generating value and establishing a competitive advantage.

Conducting a value chain analysis is essential for achieving a competitive advantage. It enables a company to thoroughly review all its operations to identify and rectify inefficiencies. By fine-tuning these processes, a business can lower costs, enhance value, and boost profitability, ensuring it remains competitive.

Although value chains and supply chains are interconnected, they focus on different aspects and have unique strategic implications.

Enhancing the value chain involves a continuous assessment of each business activity to improve efficiency and strengthen competitive positioning. By systematically reviewing processes, companies can provide greater value to customers while keeping costs low.