PREPARED BY :-

ANUBHAV KEJRIWAL
 THE VALUE IS THE TOTAL AMOUNT (i.e.
TOTAL REVENUE) THAT BUYERS ARE
WILLING TO PAY FOR A FIRM’S PRODUCTS.
 THE DIFFERENCE BETWEEN THE TOTAL
VALUE (OR REVENUE) AND THE TOTAL COST
OF PERFORMING ALL OF THE FIRM’S
ACTIVITIES PROVIDES THE MARGIN .
 THE VALUE CHAIN IS A TOOL DEVELOPED BY
DR. MICHAEL PORTER(HARVARD BUSINESS
SCHOOL)
 Porter’s definition includes all activities to
design, produce, market, deliver, and support
the product/service.
 The value chain is concentrating on the activities
starting with raw materials till the conversion into
final goods or services.
 Two categories:
Primary Activities (operations, distribution,
sales)
Support Activities (R&D, Human Resources)
 Value
Chain is categorized into types
based on the type of organizations.

 Manufacturing based.
 Service based.
 Both manufacturing and service based.
 Used to identify sources of competitive
advantage
 Specifically:
• Opportunities to secure cost advantages
• Opportunities to create product/service
differentiation
 Includesthe value-creating activities of all
industry participants
 Primary activities:
Those that are involved in the
creation, sale and transfer of
products (including after-
sales service)
 Inbound logistics
 Operations
 Outbound logistics
 Sales and marketing
 Service and support
 Support Activities:
Those that merely support the
primary activities
 Human resources
(general and admin.)
 Tech. development
 Procurement
1.INBOUND LOGISTICS
- CONCERNED WITH RECEIVING, STORING, DISTRIBUTING
INPUTS (e.g. HANDLING OF RAW MATERIALS, WAREHOUSING,
INVENTORY CONTROL)

2. OPERATIONS
- COMPRISE THE TRANSFORMATION OF THE INPUTS INTO THE
FINAL PRODUCT FORM (E.G. PRODUCTION, ASSEMBLY, AND
PACKAGING)

3. OUTBOUND LOGISTICS
-INVOLVE THE COLLECTING, STORING, AND DISTRIBUTING THE
PRODUCT TO THE BUYERS (e.g. PROCESSING OF ORDERS,
WAREHOUSING OF FINISHED GOODS, AND DELIVERY)
4. MARKETING AND SALES
-Identification of customer needs and generation of sales.
(e.g. ADVERTISING, PROMOTION, DISTRIBUTION)

5. SERVICE
-INVOLVES HOW TO MAINTAIN THE VALUE OF THE PRODUCT
AFTER IT IS PURCHASED.(e.g. INSTALLATION, REPAIR,
MAINTENANCE, AND TRAINING)
1.FIRM INFRASTRUCTURE
The activities such as Organization structure, control system,
company culture are categorized under firm infrastructure.
2.HUMAN RESOURCE MANAGEMENT
Involved in recruiting, hiring, training, development and
compensation.
3.TECHNOLOGY DEVELOPMENT
These activities are intended to improve the product and the
process, can occur in many parts of the firm.
4.PROCUREMENT
Concerned with the tasks of purchasing inputs such as raw
materials, equipment, and even labor.
 The sources of the competitive advantage of a firm can be seen
from its discrete activities and how they interact with one one
another.
 The value chain is a tool for systematically examining the activities
of a firm and how they interact with one another and affect each
other’s cost and performance.
 A firm gains a competitive advantage by performing these
activities better or at lower cost than competitors.
 Helps you to stay out of the “No Profit Zone”
 Presents opportunities for integration
 Aligns spending with value processes
 THE VALUE CHAINS OF THE DIFFERENT
FIRMS WITHIN AN INDUSTRY VARY
FROM ONE ANOTHER.
 IN FACT, THE DIFFERENCES IN THE
VALUE CHAINS AMONG THE
DIFFERENT INDUSTRY PLAYERS
PROVIDE THE SOURCE OF
COMPETITIVE ADVANTAGES BETWEEN
THESE PLAYERS.