Value chain analysis evaluates each activity involved in creating and delivering a product or service, from initial conception to final delivery. This analytical tool helps organizations identify areas for improvement and competitive advantage, and includes two types of activities - Primary Activities, and Support Activities.
Primary Activities
Inbound Logistics Involves receiving, storing, and distributing raw materials used in production.
Operations Encompasses processes that transform inputs into finished products, including manufacturing and assembly.
Outbound Logistics Handles storage and distribution of finished products to customers.
Marketing and Sales Activities related to promoting and selling products to customers.
Service Post-sale activities that maintain and enhance product value.
Support Activities
Procurement Process of acquiring necessary resources and raw materials.
Technology Development Research and development of products and process improvements.
Human Resource Management Managing recruitment, training, and employee development.
Firm Infrastructure Organizational structure, management, and legal support.
Strategic Benefits
Cost Optimization Identifies areas where costs can be reduced while maintaining or improving value.
Quality Enhancement Helps improve product or service quality through systematic analysis.
Competitive Advantage Enables differentiation from competitors through process optimization.
Implementation Process
- Map the value chain by identifying primary and support activities.
- Analyze each activity’s cost and value contribution.
- Evaluate linkages between activities.
- Identify improvement opportunities.
- Implement strategic changes based on findings.
Value chain analysis differs from supply chain analysis by focusing on value creation rather than just the movement of goods, helping businesses deliver maximum value while minimizing costs.
Examples
A Value Chain for a Differentiation Strategy
A Value Chain for a Cost Leader Strategy
