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38626 results in Cambridge Textbooks

Page 973 of 1932

  • 23 - Value Chain

  • from PART TWO - The 30 most useful models
  • Marcel Planellas, Anna Muni
  • Book:
    Strategic Decisions
    Published online:
    17 October 2019
    Print publication:
    19 September 2019, pp 148-151

  • Summary

    The Value Chain is a model used to identify the core competencies and activities that will create a competitive advantage for the company.

    It advocates that an organization's activities can be divided into five primary and four support activities.

    Primary activities involve the development of the product or service: inbound logistics, operations, outbound logistics, marketing and sales, and after-sales service.

    Support activities include functions such as: company infrastructure, human resources management, technological development and procurement.

    At the end of the chain is margin, i.e., the difference between costs (of the process and functions) and what the buyer is willing to pay for the value obtained.

    MICHAEL PORTER (b.1947)

    In response to criticism for not affording enough attention to the company's internal situation and a lack of methodologies for implementing strategy, Porter devised the Value Chain Model in 1985.

    The Value Chain is one of the most widely used tools for identifying the core activities that will create a competitive advantage for a company.

    The Value Chain can be used in the analysis stage to perform an internal analysis of the company and in implementation to reconfigure activities.

    WHEN

    The Value Chain enables a company to be broken down into strategically important activities to be able to focus on the ones that are sources of competitive advantage, create a basis for differentiation or allow it to lower costs. This approach forces managers to look at each activity not only as a cost, but as a way of adding more value to the end product or service.

    It should also be borne in mind that a company's value chain is part of a wider value system that may include upstream companies (suppliers), downstream firms (distributors) and companies in both directions.

    HOW

    By analyzing each of the company's activities and the entire value chain, you can see the importance of each activity and cost behavior, allowing you to reconfigure processes and functions, improve the links between activities, and decide which ones are essential and which ones can be outsourced.

    Corporations use the model to identify synergy between business units. A company's competitive position is obtained by comparing its value chain with that of the industry or its largest competitors.

Page 973 of 1932