The Value Chain Analysis Template

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com
Stefano Messori | Regional Development Consultant
+353 (0)87 322 27 28
The Value Chain Analysis Template
Developed by Stefano Messori, this spreadsheet is just one in a series prepared as a means to help you implement strategic tools with
company. The purpose of this particular spreadsheet is to introduce you to the concept of the Value Chain. This is another key factor in
of strategy development.
The Value Chain was introduced to the field of management by Professor Michael E. Porter in his book Competitive Advantage: Creatin
Sustaining Superior Performance (Free Press, 1985), the English version of which has now exceeded its 30th print. Since its initial pub
book has also been translated into 13 languages.
Implementation process:
In order to separate the numerous activities that a company performs using the value
models, companies must follow a number of steps:
1) Organise a meeting with all of the line managers in charge of the different functions of the
2) Introduce them to the concept of the value chain as an activity-based view of the company and explain why it is important.
3) Ask each manager to prepare a report (for their own department) explaining the different activities they perform, and how these ac
connect with those of the other departments. Underline possible problems and suggest potential solutions. A deadline should be impo
Stefano Messori - Regional Development Consultant
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+353 (0)87 322 27 28
connect with those of the other departments. Underline possible problems and suggest potential solutions. A deadline should be impo
4) Collect all of the reports and determine whether the activities performed by the different departments are consistent with the overa
of the company. Where possible, identify connections between the activities highlighted.
As different people within a company may be involved in the segmentation process, care must be taken to avoid the du
of files. Duplication can hinder the successful completion of the project. If your business does not possess software allo
different members of staff to work on the same files, and the IT department is unable to come up with an ad hoc solutio
purposes of this project, there is a free version of Google Apps that allows users to share Microsoft Office files without
for their duplication. As Google Apps is a web hosted application, there are some data security issues. Speak to your IT
department / advisor for suggestions.
strategic tools within your

nother key factor in the process
Advantage: Creating and

Since its initial publication, the
rms using the value chain
ent functions of the company.
important.
, and how these activities
ine should be imposed.
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n to avoid the duplication

sess software allowing
an ad hoc solution for the
ffice files without any need
Speak to your IT
+353 (0)87 322 27 28
+353 (0)87 322 27 28
The Value Chain
FIRM INFRASTRUCTURE
Support
Activities
HR MANAGEMENT
TECHNOLOGY DEVELOPMENT
MARGIN
PROCUREMENT
INBOUND
LOGISTICS
OPERATION
S
OUTBOUND
LOGISTICS
Primary Activities
MARKETING
& SALES
SERVICE
MARGIN
SERVICE
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+353 (0)87 322 27 28
Firm Infrastructure
Your firm infrastructure plays an important role in your business. It supports your entire value chain and not just individual activities. D
on whether your firm is diversified or not, your firm infrastructure may be self-contained or divided between your business and your pa
company. The firm infrastructure is frequently viewed only as overhead but it can be a powerful source of competitive advantage.
Some of the most typical aspects of firm infrastructure include the following:
1)
2)
3)
4)
5)
6)
7)
General management
Planning
Finance
Accounting
Legal
Quality Management
Governmental affairs
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1) General
Management
Describe how the general management of your company influences the manner in which the other activities in
company are performed. For example, how do the company directors communicate the company strategy? Do t
active role in the day to day routine of your organisation?
2) Planning
How is your strategic plan being implemented in your organisation? Who is responsible for its execution?
3) Finance
How is the finance department, and its activities, connected with the other components of the infrastructure of
How does it influence the other activities carried out within the overall value chain of your company?
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4) Accounting
How do the accounting activities, and their outcomes, influence the other support and primary activities?
5) Legal
Are you involved in the type of business where the legal aspects associated with your product and production p
greatly influence the way in which other activities are performed? Pharmaceutical companies offer a good exam
situation whereby the legal and regulatory factors greatly affect all of the other activities performed within the c
6) Quality
Management
How do the various activities performed in order to achieve more consistent quality control over your product a
processes influence the manufacturing process in your business?
7) Governmental
Affairs
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Is your relationship with regulatory bodies an important aspect of your business? How do these connections in
manner in which the other activities taking place within your company are performed?
N.B.: In the case of diversified firms, infrastructure is typically split between the business unit and the corporate levels (e.g., finance i
situated at the corporate level whereas quality management takes place at the business unit level). However, many infrastructural act
at both the business unit and the corporate level.
dividual activities. Depending

usiness and your parent
tive advantage.
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e other activities in the

pany strategy? Do they have an
s execution?
he infrastructure of your firm?

ompany?
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ry activities?
ct and production process can

s offer a good example of a
formed within the company.
ver your product and
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se connections influence the
vels (e.g., finance is often

y infrastructural activities occur
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+353 (0)87 322 27 28
HR Management
Human resource management is the second type of support activity. Human resources play an important role in reinforcing your comp
advantage, as the determining factor in the skills and motivation of your employees, and with regard to the costs of hiring and training
Typical human resource management activities include the following:

1) Recruiting
2) Hiring
3) Training
4) Development
5) Compensation
Stefano Messori | Regional Developemet Consultant
+353 (0)87 322 27 28
1) Recruiting
Recruiting the right people is fundamental to the success of your company. How does the recruiting process wor
organisation? Does it ensure that your newly recruited employees are not simply the best specialists, but the pe
suited to advancing your company strategy?
2) Hiring
What is the trade-off between hiring and recruiting and training in your company? Understanding how this balan
fundamental to your competitive advantage.
3) Training
To what extent do the training activities in your organisation reinforce and blend with the other support and prim
activities? For example, a student internship programme may represent a good opportunity for both primary an
activities.
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4) Development
To what extent does your human resources development programme enhance the skills of your employees whil
same time reinforcing the competitive advantage of your organisation? Google, for example, permits its engine
dedicate about 20 % of their time to working on and enhancing their skills by focusing on chosen projects within
organisation.
5) Compensation
To what extent does the compensation system within your company reinforce and motivate the employees in yo
organisation? How does it influence the different activities carried out within your organisation? Compensation s
be perceived only in monetary terms but in a broader array of rewards (personal, moral, ethical).
N.B.: Too often human resources management would appear to be confused with regard to its role in reinforcing competitive advantag
a central one and should be clear!
nforcing your competitive

f hiring and training.
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cruiting process work in your

ecialists, but the people most
nding how this balance works is
her support and primary

or both primary and support
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our employees while at the

permits its engineers to
osen projects within the
he employees in your
on? Compensation should not
cal).
mpetitive advantage. Its role is
+353 (0)87 322 27 28
+353 (0)87 322 27 28
Technology & Development
Technology development represents the third type of support activity. The purpose of technology development is to improve your prod
processes occurring in your company. Technology development takes many forms, from basic research and product design to media re
process equipment design, and servicing procedures.
Typical activities in the area of technology development include the following:

1) Research & product design
2) Process implementation
3) Servicing procedures
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1) Research &
product design
Technology development related to your product and its features supports the entire chain. You have to identify
technology development can help you to maintain and foster your competitive advantage in all of your compan
activities.
2) Process
Implementation
Technology development related to process implementation is normally associated with a particular primary or
activity forming your value chain.
3) Servicing
procedures
Technology development influences all of the different activities your company needs to perform in its servicing
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N.B.: Technology development tends to be associated with the engineering department or the development group. Typically, however
many parts of the firm, although it is not easy to identify all of its implications for your value chain.
improve your product and the

design to media research,
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You have to identify how

all of your companys
rticular primary or support
orm in its servicing procedures.
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Typically, however, it occurs in
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+353 (0)87 322 27 28
Procurement
Procurement is the fourth and final type of support activity. It refers to the purchasing of the inputs used in your firms value chain, and
inputs themselves. The inputs purchased may include raw materials, supplies and other consumable items, as well as assets such as m
laboratory equipment, office equipment and buildings.
Purchasing activities may be subdivided according to:

1) Procurement by the purchasing department
2) Procurement by other departments
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1) Procurement by A purchasing department engages in many value activities, and impacts the whole of the value chain.
the purchasing
department
2) Procurement by When procurement is performed by plant managers, office managers and others outside of the purchasing depa
other departments impact of these acquisitions processes is limited to the function they perform.
N.B.: Improving your purchasing practices can greatly affect the cost and the quality of the inputs purchased, as well as the costs of o
activities associated with receiving and using these inputs, and interacting with suppliers.
ms value chain, and not to the

as assets such as machinery,
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ue chain.
he purchasing department, the
ell as the costs of other
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+353 (0)87 322 27 28
Inbound Logistics
Inbound logistics represents the first category of primary activity in your value chain. It comprises the activities relating to the receipt
inputs necessary for the production of your product, as purchased by the purchasing department (support activity).
Typical inbound logistics activities are as follow:

1) Receiving & storing inputs
2) Diffusion of inputs to the different departments
3) Warehousing
4) Inventory control
5) Return to suppliers
1) Receiving &
storing inputs
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Describe here the activities performed in your organisation with regard to the receipt and storage of inputs on y
premises. How effective is the communication between the procurement division (support activity) and those re
for inbound logistics?
2) Diffuse inputs to How does your organisation use these inputs once they have been stored? How effective is the communication
the different
your inbound logistics division and your operations departments?
departments
3) Warehousing
How much raw material or stock do you need for the day to day running of your organisation? What is the best
storage? Your organisation can increase its competitive advantage by modelling its warehousing practices to yo
strategy.
+353 (0)87 322 27 28
4) Inventory
control
Inventory control should be an area of interest not only for your accounting department, but should also be mon
strategy purposes. Understanding how the different parts of your organisation use inputs and verifying the pres
trends can be illuminating and may help you increase your advantage.
5) Return to
suppliers
How do you manage the procedure for making returns to suppliers? How is the relevant information communica
the department using the purchased material to those responsible for inbound logistics, and to those responsib
purchasing the items? Awareness of these connections will inform your buying procedures.
ating to the receipt of the
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orage of inputs on your

ctivity) and those responsible
he communication between
? What is the best solution for

sing practices to your own
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should also be monitored for

d verifying the presence of
mation communicated from

to those responsible for
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+353 (0)87 322 27 28
Operations
Operations represents the second category of primary activity in your value chain. It comprises the activities responsible for transform
purchased inputs into your final product.
Typical operations activities include the following:

1) Machining
2) Assembling
3) Testing
4) Packaging
5) Equipment maintenance
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1) Machining
How many different types of machining process do you have in place? How do they interact with one another? A
located in the same plant? Identifying the linkages between your machining processes can be enlightening in te
ways to improve your advantage.
2) Assembling
Once the different inputs have been modified so as to suit the specific requirements of your product, what are t
assembling activities that take place in your organisation? How do you coordinate these activities?
3) Testing
Who in your production plant is responsible for testing your product for faults? How does this activity feed back
different activities carried out in your operations area? To what extent is there a process of learning taking place
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4) Packaging
Once the product has reached the final stage in your production plant, do you need to package it? If so, what un
organisation is responsible for packaging? How effective is the flow of information between the different produc
5) Equipment
maintenance
The efficiency of your equipment is fundamental to your operations. What type of activities are taking place to g
the efficiency of your machinery, and who is responsible? How effective is communication between the person o
department responsible for maintenance and those responsible for the different production functions?
nsible for transforming the
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with one another? Are they

e enlightening in terms of new
product, what are the different

vities?
activity feed back into the

earning taking place?
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ge it? If so, what unit in your

he different production units?
are taking place to guarantee

etween the person or
unctions?
+353 (0)87 322 27 28
+353 (0)87 322 27 28
Outbound Logistic
Outbound logistics represents the third category of primary activity in your value chain. It comprises the activities relating to the stora
finished product within your facilities and its delivery to your buyers once an order has been placed.
Typical outbound logistics activities include the following:

1) Storage of the finished product
2) Order processing
3) Scheduling
4) Delivery
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1) Storage of the
finished product
Once your product has been completed, do you need to store it? If so, how in tune are your storage procedures
activities and workings of your sales department?
2) Order
processing
How is an order communicated from your sales department to the outbound logistics division in your organisati
connection between sales and outbound logistics optimised? Is it possible to improve your order flow, tailoring i
own competitive advantage, rather than merely implementing general best practice procedures?
3) Scheduling
How are deliveries planned in your organisation? Is this process in line with the delivery deadline guarantee pro
customers by the sales department?
4) Delivery
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What types of delivery system do you have in place? Are delivery activities performed by different departments
company? If so, would it be possible to better organise them?
elating to the storage of the
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torage procedures with the
n in your organisation? Is the

rder flow, tailoring it to your
ures?
dline guarantee provided to
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fferent departments in your
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+353 (0)87 322 27 28
Marketing & Sales
Marketing and sales form the fourth category of primary activity in your value chain. These activities induce potential buyers to purcha
product and provide a means whereby they can do so.
Typical marketing and sales activities include the following:

1) Advertising
2) Promotion
3) Channel selections & relations
4) Price decision
5) Sales
Stefano Messori | Regioanl Development Consultant
+353 (0)87 322 27 28
1) Advertising
How is the company communicating its brand? What types of channel is it using? How do other activities in the
influence the way the brand is perceived by the final customer?
2) Promotion
What type of promotion techniques are in place? How does the decision to adopt a new promotion approach com
Who is involved in the decision? How do they influence the quantities produced by the company?
3) Channel
selections &
relations
What types of channel is your company using to deliver the product to the final customer? What are the trade-o
in using different channels? How does the emergence of new channels affect these trade-offs?
+353 (0)87 322 27 28
4) Price decision
What types of discount is your sales force using? How do these discounts reflect your overall strategy? Are thes
in line with your marketing, advertising and promotion polices?
5) Sales
What sales techniques are your company implementing? Direct sales, cold calling, etc.? How do these techniqu
your value proposition? To what extent is it possible to adapt broad sales techniques such as AIDA (Attention Int
Action) in order to improve your own competitive advantage?
ial buyers to purchase your
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her activities in the company
motion approach come about?

any?
What are the trade-offs involved

s?
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strategy? Are these discounts
do these techniques match

AIDA (Attention Interest Desire
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+353 (0)87 322 27 28
Service
Service represents the fifth and final category of primary activity in your value chain. The service category comprises those activities g
towards maintaining the value of your product once it has been sold to the final customer.
Typical services activities include the following:

1) Installation
2) Repairs
3) Training
4) Parts supply
5) Product adjustment
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1) Installation
Does your product need to be installed at the customers premises? What does the installation procedure involv
effective is communication between the installation team and the outbound logistics division?
2) Repairs
How do you manage repair activities? Does your organisation provide repairs or does it outsource? What type o
are you offering? Is this in tune with your overall strategy?
3) Training
Do you need to train your customers for better use of your product? If so, do you provide this training or are you
outsourcing it? What are the trade-offs involved in this decision? How do the other activities that your company
influence the level of knowledge needed to operate your product?
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4) Parts supply
How do you provide spare parts to your customers? Do your distributors or installers store some of these parts t
This choice must be consistent with the activities you perform in other parts of your value chain, such as outbou
logistics, and sales and marketing.
5) Product
adjustment
Is your product customised? What level of customisation do you provide? The activities involved in product cust
play a central role in deciding what type of target customer you are trying to reach.
es those activities geared
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on procedure involve? How

n?
ource? What type of warranty
s training or are you

that your company performs
+353 (0)87 322 27 28
ome of these parts themselves?

ain, such as outbound
ved in product customisation
+353 (0)87 322 27 28

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www.stefanomessori.

Stefano Messori | Regional Development Consultant

+353 (0)87 322 27 28