The article focuses on the main aspects of Value chain analysis. The activities entailed in the framework are discussed in detail, with respect to competitive strategies and value to the customer. The article includes tips for students and analysts on how to write a good Value chain analysis for a firm. Moreover, sources of findings information for value chain analysis have been discussed. The limitations of Value Chain analysis as a model have also been discussed.
Introduction The value chain approach was developed by Michael Porter in the 1980s in his book “Competitive Advantage: Creating and Sustaining Superior Performance” (Porter, 1985). The concept of value added, in the form of the value chain, can be utilised to develop an
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The value chain analysis essentially entails the linkage of two areas. Firstly, the value chain links the value of the organisations’ activities with its main functional parts. Then the assessment of the contribution of each part in the overall added value of the business is made (Lynch, 2003). In order to conduct the value chain analysis, the company is split into primary and support activities (Figure 1). Primary activities are those that are related with production, while support activities are those that provide the background necessary for the effectiveness and efficiency of the firm, such as human resource management. The primary and secondary activities of the firm are discussed in detail below.
Primary activitiesThe primary activities (Porter, 1985) of the company include the following: Inbound logisticsThese are the activities concerned with receiving the materials from suppliers, storing these externally sourced materials, and handling them within the firm. Operations These are the activities related to the production of products and services. This area can be split into more departments in certain companies. For example, the operations in case of a hotel would include reception, room service etc. Outbound logistics These are all the activities concerned with distributing the final product and/or service to the customers. For example, in case of a hotel this activity would entail