Importance of Value Chains and Value Chain Analysis

602 Words Jan 11th, 2018 2 Pages
The value chain, as Porter identified, incorporates the following drivers of revenue and profit in an organization: inbound logistics, operations, outbound logistics, marketing and sales, and service. Processes which are how you do things are used through the value chain. By definition, processes are used every time you do something, so this is all quite self-evident.
In order to extract value from the value chain, a company should outperform its competitors at different points. For example, in inbound logistics the company has different processes such as how it goes about finding inputs (procurement) to how it negotiates for them, and how it gets those inputs to the point where they can undergo operations (supply chain management). Where set processes exist, these functions can be standardized and formalized. The value chain implies that the company can be better than its competitors, so its methods must be replicable in order that it develop and maintain competitive advantage. It is process by which the company is able to do this. The processes allow for the standardization and replicability that drives value throughout the value chain.
When the different elements of the value chain are examined, it is formalized processes that allow companies to extract value. Processes do this by providing a baseline against which incremental changes and improvements can be made. Where there are set processes, there…

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