Value Chain : Competitive Advantage

1492 Words Apr 16th, 2015 6 Pages
Value Chain as Competitive Advantage
The idea of a value chain was first proposed by Michael Porter (1985) who identified that the more value an organization creates, the more profitable it is likely to be. Porter describes the value chain as the internal processes or series of activities a company performs “to design, produce, market, deliver and support its product” (Porter, 1985). John Shank and V. Govindarajan (1993) describe the value chain in broader terms than does Porter, affirming “the value chain for any firm is the value-creating activities all the way from basic raw material sources from component suppliers through to the ultimate end-use product delivered into the final consumers hands.”
There are two major categories of activities in business: primary activities and support activities. Each of these activities contributes to a firm 's relative cost position and create a basis for differentiation. Primary activities directly involved the products and services transforming inputs to outputs and delivery or after-sales support. Examples of primary activities include inbound logistics, operations, outbound logistics, marketing & sales and customer service. The other major category of business activities is support activities which includes procurement, technology, human resources and firm infrastructure. Porter suggests that activities within an organization add value to the service and products that the company produces, and that all these activities should be…
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