Value Chain

The value chain is a concept developed to analyse the activities within a company in order to determine their contribution to the final product or service. In this glossary article, we will take a closer look at the value chain, its importance and how it is applied in the business world.

Definition Value Chain

The value chain is a model designed by Michael Porter. It provides an overview of all the activities that a product or service goes through from raw material procurement to sale. These activities are systematic and organised into a chain, each of which adds value to the final product. It includes primary activities such as inbound logistics, operations, outbound logistics, marketing and sales, as well as services and secondary activities such as company infrastructure, human resources, technology development and procurement.

Why is the Value Chain important?

A precise value chain enables a company to identify the specific activities that add the most value to its products and services. This leads to efficient resource allocation, faster processes and, ultimately, more profitable business results. It also helps identify opportunities for differentiation to gain a competitive advantage over competitors.

Application of the Value Chain in the business world

The application of the value chain in the business world is broad and varies depending on the industry and business model. Companies use the value chain to optimise business processes, reduce costs and increase quality, which leads to higher customer satisfaction.

In e-commerce, the value chain can be used to determine which activities contribute to customer satisfaction, whether it is a responsive website, fast delivery times or excellent customer service. In the manufacturing industry, the value chain is used to identify bottlenecks in the production chain that can be eliminated to speed up the production process and improve quality.

Conclusion

The value chain is an important tool that helps companies operate effectively and efficiently. It enables companies to optimise their internal processes, reduce costs, improve quality and gain a competitive advantage. A thorough understanding and application of value chains can lead to performance improvements that benefit both companies and customers.

FAQ

What is a value chain?

A value chain is the systematic representation of all business activities required to create a product or service. It begins with raw material procurement and ends with the end customer. Each stage of the chain adds value to the product, thereby creating the final sales value.

How does the value chain differ from the supply chain?

While the supply chain primarily describes the physical flow of materials and products, the value chain focuses on activities that create value. The value chain is more strategically oriented and considers both primary and supporting activities that contribute to value generation.

What are the five primary activities of a value chain?

The five primary activities according to Porter are:

1. Inbound Logistics - Goods receipt and warehousing
2. Operations/Production - Transformation of inputs into the final product
3. Outbound Logistics - Storage and distribution of finished products
4. Marketing and Sales - Product marketing and sales
5. Service - Customer service and after-sales support