The value chain was a concept initially proposed by McKinsey and later developed and made public by Harvard strategy guru Michael Porter. According to Porter, the value chain is defined as the complete flow of products from the suppliers to the customers and management of the information flow in a way that maximizes the consumer satisfaction with the increase in the profit margins of the company. Simply, it includes a series of value-adding activities connecting a company 's supply side (raw materials, inbound logistics, and production processes) with its demand side (outbound logistics, marketing, and sales). And these activities are supported by the infrastructure of the firm, human resource management, technology and development, …show more content…
If there is an inbound logistics technology, there is also an outbound logistics technology. Outbound logistics refer to as the delivering of the product from the production area to the market or to the buyer itself. Outbound logistics employ almost the same technology used by the inbound logistics, it also requires transportation technologies, the handling, packaging, communication and information systems. Marketing the product and selling it to the market also requires technology through the use of media and information systems. The role of the firm usually do not stop after a consumer purchased a firm’s product, after-purchase services are important and product innovation is a constant process if the firm is aiming to stay at a competitive advantage from its competitors. After-purchase services and product innovation also requires the use of technologies. Because of technologies, innovation and creation of new products to suit customer satisfaction are made faster. We can note that technology is widely used across the value chain, and to the extent that technology affects uniqueness of the product, and this leads to competitive advantage. Moreover, value chain activities are not isolated from one another. Rather, one value chain activity often affects the cost or performance of other ones. Linkages may exist between primary activities and also between primary
The term value chain refers to the idea that all of the functions of a company, including production, marketing, product development, service,
The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)
How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain?
One of Porter’s main contributions was Porter’s value chain. The value chain is all the activities an organization undertakes to create value for a customer. According to Porter, there are two ways to gain an edge over competitors. A firm must provide comparable but value but perform the activities on the chain at a lower cost, or; Perform services in a unique way
A value chain analysis is a strategic analysis of an organization that uses value creating activities (Dess, McNamara, & Eisner, 2016, p. 76). The value chain analysis describes a company’s activities and relates them to an analysis of the competitive strength of the company
The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.
According to Michael Porter’s concept about value chain, “activities within the business companies add value to the product and service that the business organization or companies produces”. The idea of the value chain is based on the process view of organization, the idea of seeing a manufacturing firm as a system, made up of subsystems each with inputs transformation process and output. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources – money, labour, materials, equipment, buildings, land, administration and
The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.
The basic principle in defining the value chain, according to Michael Porter (Porter, 1985), is that the activities include a variety of disaggregations from the below three perspectives. First, they have different economics, implying that these activities are functioning in different segments of the market. Second, even though the economics differentiation is not that evident, isolated activities should have a potential impact for it. Third, value-adding activities have significant input scale.
Keane (2008) stated to design, manufacture, promote, offer and facilitate its product or services, all organization engages in some activities. All of these activities of an organization are shown through the use of value chain process. The manner in which organization performs its varying activities along with the firm’s value chain mirrors the organization’s background, strategy along with the way in which the organization executes its strategy. Ponte (2008) stated that the analysis of value chain of an organization is used to develop the organization’s competitive strategies along with formulation the connected and interconnectedness between all the organizational activities that formulate value. Francis, Simons, and Bourlakis (2008) stated that value chain analysis is a helpful tool as an organization looks to attain competitive advantage. Furthermore, Rieple and Singh (2010) stated that a value chain is a useful tool in conceptualizing the varying activities
The function of the value chain is to contribute with cost- efficient activities and simplify the purchase process (Coughlan et al., 2006). But if the chain consists of many actors the ones far back could have limited or no contact with customers resulting in lost of valuable information (REF).
According to the theory of Jim Riley, Value chain analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business couold be grouped under two headings: Primary and Support activities.
A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael Porter (Porter, 2013)
The value chain analysis (shown in appendix) was also generated by Michael Porter. This model is referred to “identifying ways to increase the efficiency of the chain” (Investopedia, n.d.). Furthermore, the overall objective is to produce maximum value with minimum total cost and establish a competitive advantage.
A value chain is nothing but a set of activities that a firm operates to deliver a much valuable and quality product or services in the market. The term comes from Business management and was firstly coined by Mr. Michael Porter in his best seller.