Value Chain Analysis

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The big picture:

Michael Porter came up with the concept of the value chain. In his influential 1985 book "Competitive Advantage", he instigates that understanding how company creates value, and looking for ways to add more value, are critical elements in developing a competitive strategy. The premise is that taking into account the value chain activities a company performs when...

When to use it:

This model is useful in determining the development of competitive advantage. It is an essential tool for separating the generic value-adding activities of a firm into primary and secondary activities. An assumption is based on that an advantage or disadvantage may arise within any of the primary or secondary activities. Moreover, if the links between value chain activities are thoroughly understood then it is believed that a company can make sensible decisions on whether to make or buy...

How to Use the Tool:

The tool may be used to analyse the competitive advantage or lack of it. In order to better understand the activities through which a firm develops a competitive advantage and creates value, it is beneficial to divide the business system into a series of value-generating activities.

Value Chain Template

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