Porter identified primary and support activities as shown in the following diagram. Porters value chain lists nine activities that are found in most businesses. What are the primary activities of michael porters value. According to michael porter, value chain consists all. The value chain template in powerpoint format includes three slides. Value chain presentation template free powerpoint templates. The concept was created around 1985 by michael porter, harvard business school professor. Michael porter defines value chain as a representation of a firms value adding activities, based on its pricing strategy and cost structure.
He is credited for creating great works, porters five forces analysis, competitive strategy, national diamond and value chain. Porter defines value chain as a representation of a firms valueadding. A guide to understanding the porters value chain and erp. The concept comes through business management and was first described by michael porter in his 1985 bestseller, competitive advantage. The concept of value chain was introduced by michael e. A firms value chain and the way it performs individual activities are a reflection of its history, its strategy, its. The porter value chain has been widely adopted by the business community as a mechanism to understand and comprehend complexity in. Creating and sustaining superior performance porter 1985. Michael eugene porter is an american academic known for his theories on economics, business strategy, and social causes.
The value chain framework of michael porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage inbound logistics. The person most accredited for mounting and articulating the value chain thought is michael porter in his 1985 book, competitive advantage. Business fractals, value chain, business processes, enterprise architecture. It integrates customeroriented and costbased ideas meffert 1994, 51f. Value chain analysis and competitive advantage article pdf available in journal of general management 271. Value chain covers the entire range of activities included in the process of bringing a product to the market and to the customer. You should be familiar with the original model see figure 1 and the activities described within it. Introduction the concept of the value chain was made popular by harvard universitys professor michael porter. The activities of the vc primary activities line functions. All competitive advantage resides in the value chain. All these activities can be represented using a value chain. The value chain the term value chain was used by michael porter in his book competitive adva n tage. Use of the value chain in the process of generating a. A value chain is a set of activities that an organization does to create value for its customers.
Value chain analysis is the method for determining the critical path to enhance customer value while reducing costs. Value chain michael porter was the first person who introduced the term value chain in his book competitive advantage. Michael porterharvard business school what is the value chain. In his book competitive advantage 1985, michael porter explains value chain analysis. The strength of porter s value chain analysis is the focus on the systems and activities, with customers as the central principle, rather than on departments and expense categories. Every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product. Porter s value chain is a model that can be used as part of the strategic analysis stage of the strategic planning process and is particularly useful to assess whether an organisation has a sustainable competitive advantage. An analysis of the value chain rather than value added is. T he value chain analysis describes the activ ities the organ ization performs and links them to the organizations competitive pos ition.
Michael porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. One of his bestknown concepts is the value chain, which is used to deliver a product or service to the market and has three key objectives. A business strategy of through a value chain and comparative advantage analysis of amazons trademarks and intangibles amazon is considered the preeminent online retailer in the world. Porters value chain assumes that an enterprise is a system of. Concept of value chain international journal of business and. Tesla example how to do an industry analysis porters 5 forces explained duration. The value chain also known as porters value chain analysis is a business management concept that was developed by michael porter. The value chain also known as porter s value chain analysis is a business management concept that was developed by michael porter. Porters value chain is a model used to study the activities that are performed in the creation of a product or service by an organization.
Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firms cost of creating it. In his book, porter first time introduced value creation concept. Value chain refers to the functional activities of a business that add value to its customers. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits. Valuebased health care delivery harvard business school. The value chain from competitive advantage, by michael. It also shows the role of competitive scope in affecting the value chain. The value chain model is a useful analysis tool for defining a firms core. Strategy is on industry structure and competitor analysis in a variety.
Porter five forces analysis industry analysis definition, advantages, and criticism. Michael porter, competitive advantage provenmodels. Ikea value chain and porters five forces analysis youtube. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. The value chain from competitive advantage, by michael porter.
Since the mid1980s, michael porters value chain analysis i. Creating and sustaining superior performance value chain analysis can be complementary to other types of business. Porters value chain analysis by michael porter toolshero. Porters value chain model and competitive advantage in. A value chain is a set of activities that an organization carries out to create value for its customers. Value chain porters vrooms expectancy theory the idea of the value chain is based on the process view of organisations, the idea of seeing a manufacturing or service organisation as a system, made up of subsystems each with inputs, transformation processes and outputs. These activities add value and cost in the process of creating products and services. Developed in the early 1980s by harvard business school professor michael porter in his book competitive advantage, the value chain consists of two main components. A strategic vision to improve value by organizing around patients needs, health affairs, mar, 20. As you might have guessed, the value chain is a set of activities that will lead to the creation of value. Work by michael porter suggested that the activities of a business could be grouped under two headings. Value chain analysis to improve corporate performance. Porters value chain what is the value chain of porter.
Porters five forces and valuechain analysis brandalyzer. Porters value chain analysis is a tool that can be used to determine exactly how your company goes about the task of creating value. The value chain is concentrating on the activities starting with raw materials till the conversion into final goods or services. Hax and majluf 1996, meffert 1994, meffert 2000, hayes et. Given the importance of the value chain, michael porter developed a strategic management tool for analyzing a companys value chain.
According to porter, it consists of primary activities and support activities, all of which add value to the products or services offered by the business. Michael porter introduced value chain models in his book competitive advantage. Porter developed the value chain to help identify which activities within the firm were contributing to a competitive. The value chain the term value chain was used by michael porter. The concept of the value chain was introduced by michael porter in his text competitive strategy porter, 1995, in which he highlights the potential for different organisations within the chain and different functions within organisations to add value and thereby deliver competitive advantage. 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. Pdf on jan 1, 2014, john mcgee and others published value chain find, read. A generic, firm specific value chain is shown in figure 1.
In 1985 porter proposed the value chain as a tool to identify and to analyze the origins of competitive advantages. 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. Porter proposed a generalpurpose value chain that any company can use to examine all its activities, and to see how theyre. Value chain analysis value chain competitive advantage. Includes receiving, storing, inventory control, transportation scheduling. Porter defines value chain as a representation of a firms value adding. Above is an image of michael porter who presented the concept of value chain. Value chain analysis helps you identify ways you can create the best value for your customers.
Porters value chain analysis free management books. He offers viewing a firm as a sequential procedure of valuecreating actions as a means of a influential conceptual tool for thoughtful the. Michael porter introduced a concept known as porters value chain. Value chain analysis of procter and gamble case study. Activity analysis identify all the activities involved to deliver your product or service. Michael porter discussed this in his book, competitive advantage, in which he introduced the concept of the value chain. Value chain analysis is one way of identifying which activities are best undertaken by a business and which are best outsourced.
Value chain analysis of procter and gamble case study 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. Learn how to use the michael porter s value chain analysis to understand the collection of activities of a company that create value for its. Everything you need to know about value chain analysis. As i mentioned in the first part of this series, this model optimizes for. Porters value chain cis 4397 intro to cloud computing. Porter suggested that activities within an organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive. Porter has contributed the valuechain analysis model, which is. The value chain was designed by michael porter in 1985 as a systematic way to examine how competitive advantage develops and to identify where value is added in an organisation. Competitive advantage grows fundamentally out of value a firm is able to. Porter proposed a generalpurpose value chain that companies can use to examine all of their. This study investigates the impact of value chain on the performance of agro allied. Comparing the value chains of competitors exposes differences that determine competitive advantage. Michael porter defines value chain as a representation of a firms valueadding activities, based on its pricing strategy and cost structure.
Most existing big organizations the 800pound gorillas subscribe to michael porters value chain framework. Includes machining, packaging, assembly, equipment maintenance, testing and all other valuecreating activities that transform. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product i. In the new marketing era, with the rise of retail and ecommerce, companies have realized that your value chain will be further strengthened if you have better coordination between all departments. A value chain consists of the activities an organization performs to make a product that is valued by customers. The value chain approach is part of many current textbooks on marketing e. Value chain analysis is mentioned extensively in the first half of the book competitive advantage in 1985 by michael porter. Michael porter discussed this in his influential 1985 book competitive advantage, in which he first introduced the concept of the value chain. Porter has dedicated much of his career to studying competitive advantage. Porter has suggested many ground breaking strategic concepts like porters five forces, competitive strategy, and others. Michael porter of harvard business school developed a number of very useful frameworks, one of which, porter s value chain analysis.
Developed by michael porter and used throughout the world for nearly 30 years, the value chain is a powerful tool for disaggregating a company into its strategically relevant activities in order to focus on the sources of competitive advantage, that is, the specific activities that result in higher prices or lower costs. Porter 2008 developed an approach to analysis tools called as value chain analysis. Porters definition includes all activities to design, produce, market, deliver, and support the productservice. Pdf on jan 1, 2014, john mcgee and others published value chain find, read and cite all the research you need on researchgate. It is a set of activities that an organization carries out to create value for its customers. The value chain analysis sometimes refers to porters value chain analysis model is a wellknown business management tool developed by michael porter in 1985 in his alltime influential book competitive advantage. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
847 1190 982 887 796 871 349 526 1507 357 274 472 822 858 274 1378 1342 553 546 972 1169 22 916 398 995 252 1485 241 899 1350 1054 1203 199