Value Chain

Knowledge Center

Summary, forum, best practices, expert tips and information sources.

166 items • 2.302.152 visits


The Value Chain (VC) framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.

The activities of the VC

  • Value Chain framework modelPrimary activities (line functions)
    • Inbound Logistics. Includes receiving, storing, inventory control, transportation planning.
    • Operations. Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product.
    • Outbound Logistics. The activities required to get the finished product at the customers: warehousing, order fulfillment, transportation, distribution management.
    • Marketing and Sales. The activities associated with getting buyers to purchase the product, including: channel selection, advertising, promotion, selling, pricing, retail management, etc.
    • Service. The activities that maintain and enhance the product's value, including: customer support, repair services, installation, training, spare parts management, upgrading, etc.
  • Support activities (Staff functions, overhead)
    • Procurement. Procurement of raw materials, servicing, spare parts, buildings, machines, etc.
    • Technology Development. Includes technology development to support the VC activities. Such as: Research and Development, Process automation, design, redesign.
    • Human Resource Management. The activities associated with recruiting, development (education), retention and compensation of employees and managers.
    • Firm Infrastructure. Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc.

Creating a cost advantage based on the VC

A firm may create a cost advantage:

  • by reducing the cost of individual VC activities, or
  • by reconfiguring the VC.

Note that a cost advantage can be created by reducing the costs of the primary activities, but also by reducing the costs of the support activities. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology.

Once the VC has been defined, a cost analysis can be performed by assigning costs to the VC activities. Porter identified 10 cost drivers related to value chain activities:

  1. Economies of scale.
  2. Learning.
  3. Capacity utilization.
  4. Linkages among activities.
  5. Interrelationships among business units.
  6. Degree of vertical integration.
  7. Timing of market entry.
  8. Firm's policy of cost or differentiation.
  9. Geographic location.
  10. Institutional factors (regulation, union activity, taxes, etc.).

A firm develops a cost advantage by controlling these drivers better than its competitors do. A cost advantage also can be pursued by "Reconfiguring" the VC. "Reconfiguration" means structural changes such as: a new production process, new distribution channels, or a different sales approach.

Normally, the VC of a company is connected to other Value Chains and is part of a larger VC. Developing a competitive advantage also depends on how efficiently you can analyze and manage the entire VC. This idea is called: Supply Chain Management. Some people argue that network is actually a better word to describe the physical form of Value Chains: Value Networks.

Book: Michael E. Porter - Competitive Advantage

Special Interest Group


Value Chain (Porter) Special Interest Group.

Special Interest Group (740 members)


New Topic

Forum about the Value Chain (Porter).

How to Deal with Conflicts Between Marketing and Operations
Shapiro recognized several reasons for the conflicts between marketing and operations teams:
Value Chain in Research and Technology
Is there anyone having practice or insight on value chain specifically for research and technology? (...)
Value Chain in Legal Services
How can a value chain be incorporated in law firms? What are the primary and support activities in such legal services? (...)
Is Value Chain Analyse Only A Tool??
We study the value chain framework in the marketing plan as a situation analyzing tool. Some say that this can be used a (...)
Value Chain and Competitive Advantage Report
I know that a report on value chain and competitive advantage of the Public Sector in Lebanon was performed in 1999 upon (...)
Procurement in the Value Chain Approach
For long the value chain approach by Michael Porter and as advanced by Peter Hines has placed procurement on the periphe (...)
Developing Green Value Chains
Developing green business strategies in value chains is a new trend to maximize the competitive advantages in terms of m (...)
Combining Value Chain Analysis with Benchmarking to Analyze Competitive Advantage
How can value chain analysis and benchmarking be jointly used as tools for assessing the competitiveness of a company?
Customer Value Chain (CVC)
The customer value chain CVC is a bit similar or analogous to Michael Porter's Value Chain (The series of activities suc (...)
Value Chain Analysis is practical
Even after all these years I find the Value Chain model of Porter still one of the better, practical tools to analyse a (...)
Order Management in Porters Value Chain?
How do I segregate and fit in order management (not order fulfillment ) in Porters list of primary processes? Does it be (...)
🔥 NEW Governments Should be Considered as Value Chains for the Citizens
It's obvious that corruption, misleading and empiricism are affecting the political parties that rule many countries und (...)
Value Chain vs. Credit Crunch
In spite of today’s credit crunch crisis, the Value Chain model in my experience proved to be one of the most valuable t (...)
Agility in Value Chain
What is the role agility is playing in Porters value chain model? (...)
Value Chain Narrow Minded
Porters value chain is very good at explaining how a product adds value throughout the whole process starting from procu (...)
10 Decision Areas of Operation Management (Heizer)
Heizer wrote there are 10 decision areas of operation Management:
1. Goods and Services Design, 2. Quality Manageme (...)

Start a new topic about the Value Chain (Porter)


Best Practices

The top-rated topics about the Value Chain (Porter). Here you will find the most valuable ideas and practical suggestions.

How to apply the value chain? Activities and Linkages
The value chain has two types of activities which are the primary activities and the support activities. I can remember (...)

Value Chain Management versus Supply Chain Management?
What is the relationship between Supply Chain Management and Value Chain Management? How are they interdependent? (...)

Value Chain model in Tourism
How does the model handle a services industry like tourism? It looks to me much of the tourism industry operates on alli (...)
Value Chain Analysis in Textile Industry
I am interested in the value chain analysis in textile industry of Uzbekistan to penetrate the EU market. I know that te (...)
Value Chains > Value Networks
In an article 'Value Creation, Coordination and Positioning in Supply Relationships' in Long Range Planning (Volume 39, (...)

Role of Information Systems in Value Chain
How does Porter's value chain model help a business to use information systems for competitive advantage? (...)

Comparing Value Chain and 7S Model
Hi! I am writing an assignment on a manufacturing company and used both Porter's value chain analysis and McKinsey's 7S (...)

Value Chain for Services Industry
I have read somewhere, that this model is not applicable for services industry, is it true? And does anybody know, if po (...)

Inventory Replenishement in Value Chain
In the context of the value chain, would inventory replenishement be a support value process or a primary value proces (...)

Value Chain versus Diamond Model
Hi, can anyone explain in a few words what is the main difference between Porter's Diamond and Value Chain models? (...)

Value Chains and Industries
Interestingly, different industries often emphasize different activities in the value chain. For example, retailers trad (...)

Expert Tips

Advanced insights about the Value Chain (Porter). Here you will find professional advices by experts.

The Added-Value Chain Model

3 more Primary and 1 more Supporting Activity Added to Porter's Model
The Added-Value Chain model proposes to add an expanded set of activities to the original Value Chain concept by Porter. (...)

Good Value Chain Questions to Ask

Optimizing your Supply Chain
To more deeply understand your Value Chain, these are a few interesting questions you can ask yourself: - What are the (...)

Process Classification Framework

Alternative to Porter's Value Chain Analysis
A company's activities or processes classification is mostly based on subjective criteria, experience and sensitivity of (...)

Reported Benefits of Value-chain Initiaves

Value Chain Advantages
A survey by G. Taninecz “Forging the Chain” in Industry Week (Dec. 21, 2004) indicated the following major benefits of (...)

Implementing Added-Value Chain Model

According to Wayne McPhee and David Wheeler in the article “Making the Case for the Added-Value Chain” (Strategy & Leade (...)

How to Design a Value Chain?

Supply Chain Design
Designing or improving a value chain is not easy. Here are five bullet points to get started: 1. Begin by identifying t (...)

Online Value Chain

Use of Internet / IT
In Michael Porter's view, traditional firms have a chance to profit from deploying modern IT infrastructure and upgrade (...)

10 Decision Areas of Operation Management (Heizer)

Operations Management
According to Heizer and Render, there are 10 decision areas of Operation Management (each having typical issues): 1. Go (...)

List of Major Value Chain Obstacles

Pitfalls in Implementing Value Chain Management
Although the Value Chain approach can be effective, there are major obstacles underlying application of SCM, such as: 1 (...)

Innovating by Reconsidering Value Delivery

Fundamental Innovation
When innovating their business model, companies need to reconsider their value proposition from all perspectives. One of (...)

Remember to Focus your Improvement Efforts?

Achieve More With Less, Kaizen, BPR, JIT, Lean, Value Chain
Very often organizations consider continuous improvement as committing on improvement efforts, and thus creating project (...)

Value Networks

Value Chain versus Value Network
Today value chains have become value networks. In a lot of industries ranging from software to manufacturing the boundar (...)

Three Reasons for Dysfunctional Buyer - Supplier Relationships

Supply Chain Management, Purchasing, Alliances, Partnerships, Supply Chain Relations
Roloff, Aßländer and Nayier (2015) did research on the conditions for (un)successful buyer-supplier relationships and fo (...)
Information Sources

Various sources of information regarding the Value Chain (Porter). Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

Electronic Markets

Search Costs and Boundaries
Ramesh Sankaranarayan study how electronic markets that facilitate broader inter-firm transactions affect the vertical s (...)

Connections and Competences in the Governance of the Value Chain

Value Chain Delocalisation
The aim of this paper by Giuseppe Tattara and Paolo Crestanello is to analyse the governance of value chains operating i (...)

The Role of Value Chain Functions, Quality Management and Innovation in Competitive Advantage

Value Chain Management, Quality Management, Innovation, Operational Excellence
This presentation firstly presents the role of functional strategies and the value chain in the achievement of competiti (...)

How Businesses can Use Information Technology (IT) in Strategic Ways

Strategic Management, Information Technology
This presentation looks at Information Technology from a strategic point of view. In other words, it discusses in what w (...)

Introduction to (Sustainable) Value Chain Analysis

Initial Understanding Value Chain Analysis
Value Chain Analysis involves analyzing three things to identify improvement areas / projects: 1. Material Flow - The f (...)

Location choices across the value chain

How activity and capability influence agglomeration and competition effects
There has been a recent revival of interest in the geographic component of firm strategy. Recent research suggests that (...)

Introduction Into Enterprise Resource Planning (ERP)

Enterprise Resource Planning, Supply Chain Management
This presentation provides an introduction into Enterprise Resource Planning and includes the following sections: 1. Wh (...)

Introduction to Supply Chain Management

Supply Chain Management, Supply Chain Design
While Porter’s value chain is a firm-level supply chain, this presentation describes supply chain management in a global (...)

Value Chain Model Diagram

Value Chain Analysis
Download and edit the 12manage PowerPoint model for limited personal, educational and business use. Republishing in int (...)

Internet-based Distribution of Digital Videos

Economic Impacts of Digitizatization
Digital technologies and, especially, the Internet are profoundly reshaping the motion picture industry. Video-on-demand (...)

Research Links

Automatically jump to further useful sources regarding the Value Chain (Porter).

News Videos Presentations Books More






Compare with: Porter Five Forces  |  Porter Competitive Advantage  |  Porter Diamond Model  |  Parenting Advantage  |  Core Competence  |  BCG Matrix  |  Growth Phases  |  Distinctive Capabilities  |  Organizational Configurations  |  3rd Party Logistics (3PL)  |  Outsourcing  |  Just-in-time  |  Bricks and Clicks  |  Value Stream Mapping  |  Delta Model  |  Vertical Integration  |  Horizontal Integration  |  Vendor Managed Inventory  |  Kraljic Model

Return to Management Hub: Change & Organization  | Finance & Investing  |  Human Resources  |  Knowledge & Intangibles  | Marketing & Sales  |  Program & Project Management  |  Strategy & Innovation  |  Supply Chain & Quality

More Management Methods, Models and Theory

Special Interest Group

Do you have a keen interest in the Value Chain (Porter)? Become our SIG Leader


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2022 12manage - The Executive Fast Track. V15.8 - Last updated: 17-1-2022. All names ™ of their owners.