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Porter's Value Chain - Made EasyThe principal idea behind Porter's value chain is to identify the strategically relevant activities performed by the business, and to analyzed each activity for its role in creating value. The activities can also be grouped into meaningful categories and compared on a relative and an absolute basis with competitors. In practice, it is best to start with a simple list of the activities of the business. Then, after the list is compiled, group the activities into major categories. For example, grouping all activities directly related to building the product or providing the service into one group of activities called "Operations." All marketing and pre-sales activities like advertising, market research, sales administration, and selling should be grouped into a category called "Marketing & Sales." The major categories which are general enough to include every activity performed by any business (although not all firms perform every activity) include: Support Activities
Primary Activities
The value chain is often drawn to illustrate the general flow of the activities necessary to produce the product, market the product and provide customer service (the primary activities. The value chain also separates out the support activities . In many situations requiring strategic decisions, the value chain is a far more useful tool than are standard financial statements |
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