Porter's Value Chain

Prepared by Richard Chalamila

• Value Chain analysis - describe the activities the organization performs and link them to the organizations competitive position.

• Therefore, it evaluates which value each particular activity adds to the organizations products or services.

• Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.

Types of Activities

• Porter’s distinguish between two types of activities.

1) Primary activities

2) Support Activities

Primary Activities

• Are directly concerned with the creation or delivery of a product or service.

a. Primary value chain activities1. Inbound Logistics

2. Operation

3. Outbound Logistics

4. Marketing and Sales

5. Service

• The of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin.

Support Activities

• These are those activities which support the primary activities. b. Support value chain activities

1. Procurement (purchasing)2. Human resource management3. Technological development4. Infrastructure

• Companies use these primary and support activities as building blocks to create a valuable product or service.

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