Explain the concept of michael porter s value chain management

porters value chain example

The key is to find areas of potential innovation. Key Takeaways Value chains help increase a business's efficiency so the business can deliver the most value for the least possible cost.

michael porter value chain book - pdf

The way in which value chain activities are performed determines costs and affects profits, so this tool can help you understand the sources of value for your organization.

Firm infrastructure This concerns the support activities within the organization that enable the organization to maintain its daily operations. Procurement Procurement is the acquisition of inputs, or resources, for the firm. In addition to ensuring that production mechanics are seamless and efficient, it's critical that a business keep its customers feeling confident and secure enough to remain loyal.

Value chain diagram

Value-chain theory analyzes a firm's five primary activities and four support activities. The delivery of a mix of products goods and services to the end customer will mobilize different economic factors, each managing its own value chain. For example, consider how human resource management adds value to inbound logistics, operations, outbound logistics, and so on. A cost driver is something that affects the cost of an activity or process. Step 1: identify sub activities for each primary activity For each primary activity, sub-activities can be determined that create a specific value for an organization. Bottom Line The primary activities within Michael Porter's value chain are used to provide a company with a competitive advantage in any one of the five activities so it has an advantage in the industry in which it operates. People are a significant source of value, so businesses can create a clear advantage with good HR practices. Overall, a business working to reduce technology costs, such as shifting from a hardware storage system to the cloud, is technological development. The value chain "takes into consideration contributions such as product design, research and development, advertising and other marketing.

Presumably each activity adds some value. Companies use these primary and support activities as "building blocks" to create a valuable product or service.

value chain analysis example service industry

Service is the activities needed to maintain the product's performance after it has been produced, including installation, training, maintenance, repair, warranty and after-sale services.

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What Are the Primary Activities of Michael Porter's Value Chain?