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The Value Chain

The Value Chain

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Published by Anant Ruia

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Published by: Anant Ruia on Jun 01, 2011
Copyright:Attribution Non-commercial

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12/08/2014

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The Value Chain
To analyze the specific activities through which firms can create a competitiveadvantage, it is useful to model the firm as a chain of value-creating activities. MichaelPorter identified a set of interrelated generic activities common to a wide range of firms.The resulting model is known as the
value chain
and is depicted below:
Primary Value Chain Activities
 
InboundLogistics
 
>
 
Operations
 
>
 
OutboundLogistics
 
>
 
Marketing& Sales
 
>
 
Service
 The goal of these activities is to create value that exceeds the cost of providing theproduct or service, thus generating a profit margin.
 
Inbound logistics
include the receiving, warehousing, and inventory control of input materials.
 
Operations
are the value-creating activities that transform the inputs into the finalproduct.
 
Outbound logistics
are the activities required to get the finished product to thecustomer, including warehousing, order fulfillment, etc.
 
Marketing & Sales
are those activities associated with getting buyers to purchasethe product, including channel selection, advertising, pricing, etc.
 
Service
activities are those that maintain and enhance the product's valueincluding customer support, repair services, etc.Any or all of these primary activities may be vital in developing a competitive advantage.For example, logistics activities are critical for a provider of distribution services, andservice activities may be the key focus for a firm offering on-site maintenance contractsfor office equipment.These five categories are generic and portrayed here in a general manner. Each genericactivity includes specific activities that vary by industry.

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