The value chain describes the full range of activities that businesses go through to bring a product or service from conception to delivery and beyond. The concept was popularized by Michael Porter in his 1985 book "Competitive Advantage: Creating and Sustaining Superior Performance."
Definition and Scope: A value chain encompasses all the processes involved in the creation of a product or service. This includes:
Sourcing raw materials.
Production processes.
Marketing and sales.
Distribution and delivery.
Customer service post-delivery.
Primary Activities:
Inbound Logistics: Receiving, storing, and disseminating inputs of the product.
Operations: Transforming inputs into the final product.
Outbound Logistics: Collecting, storing, and distributing the product to customers.
Marketing and Sales: Persuading customers to purchase the product.
Services: Activities that maintain and enhance the product's value, such as customer service.
Support Activities:
Procurement: Acquiring the resources a company needs to operate.
Technology Development: Research and development, IT, automation, etc.
Human Resource Management: Recruiting, hiring, training, and retaining workers.
Firm Infrastructure: Organizational structure, control systems, company culture, etc.
Example of Value Chain: The textbook provides an example of Walmart's value chain to illustrate how a company adds value at each step of the process, from procurement to delivery.
Importance: Understanding and optimizing the value chain allows companies to identify where they can add value, reduce costs, and gain competitive advantage. Companies can use this analysis to find opportunities for improvement, innovation, and efficiency in their processes.
