Porter Supply Chain Model

The Value Chain framework of Michael Porter is

a model that helps to analyze specific
activities through which firms can create
value and competitive advantage.

Fred R. David
Prentice Hall
The activities of the Value Chain
• Primary activities (line functions)
• Support activities (Staff functions, overhead)

Fred R. David
Prentice Hall
 Primary activities (line functions)

• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing and Sales
• Service

Fred R. David
Prentice Hall
 Support activities (Staff functions, overhead)

• Firm Infrastructure
• Technology Development
• Human Resource Management
• Procurement

Fred R. David
Prentice Hall
 Creating a cost advantage based on the value chain

• A firm may create a cost advantage:

• By reducing the cost of individual value chain
activities, or
• By reconfiguring the value chain.

Fred R. David
Prentice Hall
10 cost drivers related to value chain activities

• Economies of scale.
• Learning.
• Capacity utilization.
• Linkages among activities.
• Interrelationships among business units.
• Degree of vertical integration.
• Timing of market entry.
• Firm's policy of cost or differentiation.
• Geographic location.
• Institutional factors (regulation, union activity,
taxes, etc.).

Fred R. David
Prentice Hall