This is not the document you are looking for? Use the search form below to find more!

Report home > World & Business

Value Chain Analysis

0.00 (0 votes)
Document Description
The term 'Value Chain' was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985) . The value chain analysis describes the activities the organization performs and links them to the organizations competitive position. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advan- tage.
File Details
  • Added: October, 20th 2010
  • Reads: 1200
  • Downloads: 24
  • File size: 38.31kb
  • Pages: 2
  • Tags: competitive, analysis, products
  • content preview
Submitter
  • Name: lucas
Embed Code:

Add New Comment




Related Documents

VALUE CHAIN ANALYSIS : A CASE STUDY OF MANGOES IN KENYA

by: shinta, 11 pages

This document reviews fruit production and yield trends, mango production, marketing and processing of smallholders and traders along the mango value chain in Kenya. It also examines future

The Value Chain

by: shinta, 2 pages

The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the ...

MarketReportsOnline.com - Guide Exploration Ltd. Analysis Across the Oil and Gas Value Chain Report

by: charlesmartin17, 3 pages

"Guide Exploration Ltd." Analysis Across the Oil and Gas Value Chain is an essential source for data, analysis and strategic insight into “Guide Exploration Ltd.”. The report provides key ...

SSE plc Analysis Across the Oil and Gas Value Chain Report

by: charlesmartin17, 3 pages

"SSE plc" Analysis Across the Oil and Gas Value Chain is an essential source for data, analysis and strategic insight into “SSE plc”. The report provides key information relating to oil ...

Porter’s Strategic Models: The Five forces and the Value Chain

by: shinta, 14 pages

Porter’s Value Chain Model looks at increasing competitive advantage by reorganizing the activities related to create, support and deliver a firm’s product or service. These ...

Porter’s value chain model for assessing the impact of the internet for environmental gains

by: shinta, 18 pages

The revolutionary potential of the internet promises to transform economic and environmental gains. By reducing the amount of energy and materials consumed by business, the internet ...

Value Chain

by: shinta, 3 pages

The value chain helps an organization identify how it creates value for customers and locate where its sources of competitive advantage lie. Value chain models can be created in both ...

Application of the value chain concept in the audit of policy liabilities and the related earnings of listed South African long-term insurers

by: shinta, 17 pages

Gaining an understanding of the business and accounting processes of the insurers concerned is a key element of the complex, high-risk external audits1 of listed South African long-term ...

CSR and Our Value Chain

by: samanta, 24 pages

Cisco's value chain is the network of integrated Cisco and partner activities that creates valuable products and services for our customers. Our value chain is demand driven, distributed, global, and ...

Value Chain Requirements Management (VCRM) Summary

by: samanta, 4 pages

Most strategies fail to achieve their full potential value when moving into implementation. There are several barriers that consistently arise: * Vague strategic objectives or tactics result ...

Content Preview
- 1 -
The Value Chain
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and
Sustaining superior Performance" (1985). The value chain analysis describes the activities the organi-
zation performs and links them to the organizations competitive position.

Value chain analysis describes the activities within and around an organization, and relates them to an
analysis of the competitive strength of the organization. Therefore, it evaluates which value each par-
ticular activity adds to the organizations products or services. This idea was built upon the insight that
an organization is more than a random compilation of machinery, equipment, people and money. Only
if these things are arranged into systems and systematic activates it will become possible to produce
something for which customers are willing to pay a price. Porter argues that the ability to perform par-
ticular activities and to manage the linkages between these activities is a source of competitive advan-
tage.

Porter distinguishes between primary activities and support activities. Primary activities are directly
concerned with the creation or delivery of a product or service. They can be grouped into five main
areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of
these primary activities is linked to support activities which help to improve their effectiveness or effi-
ciency. There are four main areas of support activities: procurement, technology development (includ-
ing R&D), human resource management, and infrastructure (systems for planning, finance, quality,
information management etc.).

The basic model of Porters Value Chain is as follows:
Infrastructure
Human Resource Management
Margin
Support Activities
Technology Development
Procurement
Margin
Sales
Service
Operations
Marketing and
Inbound Logistics
Outbound Logistics
Primary Activities
Porter 1985
The term ‚Margin’ implies that organizations realize a profit margin that depends on their ability to
manage the linkages between all activities in the value chain. In other words, the organization is able
to deliver a product / service for which the customer is willing to pay more than the sum of the costs of
all activities in the value chain.

© Dagmar Recklies, 2001
Recklies Management Project GmbH § www.themanager.org
Tel. 0049/391/5975930 § Fax 0049/721/151235542 § mail: drecklies@themanagement.de

- 2 -
Some thought about the linkages between activities: These linkages are crucial for corporate success.
The linkages are flows of information, goods and services, as well as systems and processes for ad-
justing activities. Their importance is best illustrated with some simple examples:
Only if the Marketing & Sales function delivers sales forecasts for the next period to all other depart-
ments in time and in reliable accuracy, procurement will be able to order the necessary material for the
correct date. And only if procurement does a good job and forwards order information to inbound logis-
tics, only than operations will be able to schedule production in a way that guarantees the delivery of
products in a timely and effective manner – as pre-determined by marketing.
In the result, the linkages are about seamless cooperation and information flow between the value
chain activities.

In most industries, it is rather unusual that a single company performs all activities from product de-
sign, production of components, and final assembly to delivery to the final user by itself. Most often,
organizations are elements of a value system or supply chain. Hence, value chain analysis should
cover the whole value system in which the organization operates.
Supplier
Channel
Customer
Value Chains
Value Chains
Value Chains
Organizations
Value Chain
Within the whole value system, there is only a certain value of profit margin available. This is the dif-
ference of the final price the customer pays and the sum of all costs incurred with the production and
delivery of the product/service (e.g. raw material, energy etc.). It depends on the structure of the value
system, how this margin spreads across the suppliers, producers, distributors, customers, and other
elements of the value system. Each member of the system will use its market position and negotiating
power to get a higher proportion of this margin. Nevertheless, members of a value system can coop-
erate to improve their efficiency and to reduce their costs in order to achieve a higher total margin to
the benefit of all of them (e.g. by reducing stocks in a Just-In-Time system).

A typical value chain analysis can be performed in the following steps:
• Analysis of own value chain – which costs are related to every single activity
• Analysis of customers value chains – how does our product fit into their value chain
• Identification of potential cost advantages in comparison with competitors
• Identification of potential value added for the customer – how can our product add value
to the customers value chain (e.g. lower costs or higher performance) – where does the
customer see such potential
© Dagmar Recklies, 2001
Recklies Management Project GmbH § www.themanager.org
Tel. 0049/391/5975930 § Fax 0049/721/151235542 § mail: drecklies@themanagement.de

Download
Value Chain Analysis

 

 

Your download will begin in a moment.
If it doesn't, click here to try again.

Share Value Chain Analysis to:

Insert your wordpress URL:

example:

http://myblog.wordpress.com/
or
http://myblog.com/

Share Value Chain Analysis as:

From:

To:

Share Value Chain Analysis.

Enter two words as shown below. If you cannot read the words, click the refresh icon.

loading

Share Value Chain Analysis as:

Copy html code above and paste to your web page.

loading