VALUE

Value in a value chain is the value

added at each step of a
company's process for creating a
product or service

VALUE CHAIN
A value chain is a series of
consecutive steps that go into the
creation of a finished product, from
its initial design to its arrival at a
customer’s door. The chain identifies
each step in the process at which
value is added, including the sourcing,
manufacturing, and marketing stages
of its production
 VALUE CHAIN ANALYSIS
Value chain analysis (VCA) is a framework that helps businesses analyze their internal processes by breaking them
down into primary and support activities.
VCA can help companies: Improve customer relationships, Reduce costs and delivery times, Optimize inventory,
Establish better vendor management, and Standardize and optimize [Link] concept was conceived by
Harvard Business School Professor Michael Porter in his book The Competitive Advantage: Creating and Sustaining
Superior Performance.
He wrote: “Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many
discrete activities a firm performs in designing, producing, marketing, delivering, and supporting its product.”

Taking stock of the processes that comprise your company’s value chain can help you gain insight into what goes
into each of its transactions. By maximizing the value created at each point in the chain, your company can be better
positioned to share more value with customers while capturing a greater share for itself. Similarly, knowing how your
firm creates value can enable you to develop a greater understanding of its competitive advantage.
A company conducts a value chain analysis by evaluating the detailed procedures involved in each step of its
business.
The purpose of a value chain analysis is to increase production efficiency so that a company can deliver maximum
value for the least possible cost.
Value Chain Analysis also assists in keeping customers feeling confident and secure enough to remain loyal
Value chain theory analyzes a firm’s five primary activities and four support activities.
 COMPONENTS OF A VALUE CHAIN
Porter splits a business’s activities into two categories, primary and support, of which sample activities for
each are listed below. Specific activities in each category will vary according to the industry.

Primary
Primary Support
Activities
Activities Activities

Lorem ipsum dolor sit amet, Procurement

Inbound logistics consectetur adipiscing elit. Technological
Duis vulputate nulla at ante
Operations development
rhoncus, vel efficitur felis
Outbound logistics condimentum. Proin odio Human resources (HR)
Marketing and sales odio. management
Service Infrastructure
PRIMARY ACTIVITIES Defination :

Primary activities are

Inbound logistics: Activities related to receiving, warehousing, and those that go
inventory management of source materials and components directly into the
Operations: Activities related to turning raw materials and components creation of a
into a finished product product or the
Outbound logistics: Activities related to distribution, including execution of a
packaging, sorting, and shipping service

Marketing and sales: Activities related to the marketing and sale

of a product or service, including promotion, advertising, and
pricing strategy
After-sales services: Activities that take place after a sale has
been finalized, including installation, training, quality assurance,
repair, and customer service
SUPPORT ACTIVITIES Defination:

Secondary activities
Procurement: Activities related to the sourcing of raw materials, help primary
components, equipment, and services activities become
Technological development: Activities related to research and more efficient—
development, including product design, market research, and process effectively creating
development a competitive
advantage

Human resources management: Activities related to the

recruitment, hiring, training, development, retention, and
compensation of employees
Infrastructure: Activities related to the company’s overhead and
management, including financing and planning
 EXAMPLE: A COFFEE SHOP
Outbound
Inbound Logistics Operations
Logistics
Supplier Relationships: Sourcing high-
Preparation: Brewing coffee using various Service Delivery: Efficiently serving
quality coffee beans, dairy products, syrups,
methods (espresso machines, pour-over, etc.) customers, whether in-store, through
and pastries from reliable suppliers, often
and preparing food items. This requires skilled takeout, or via delivery services. Creating
emphasizing ethical sourcing and
baristas and kitchen staff. an inviting atmosphere for in-store
sustainability.
customers is also crucial.
Quality Control: Implementing standards for
Inventory Management: Managing stock
product quality, taste, and presentation to Packaging: Offering attractive and
levels for coffee, food items, and other
ensure consistency and customer satisfaction. functional packaging for takeout orders,
supplies to ensure freshness and minimize
including eco-friendly options to appeal to
waste.
environmentally conscious consumers.

Marketing and
Sales Service

Branding: Establishing a strong brand identity Customer Experience: Providing excellent

through unique offerings, ambiance, and customer customer service, fostering a welcoming
experience. This can include loyalty programs and environment, and building relationships with
seasonal promotions. regular patrons.
Digital Presence: Utilizing social media and online Feedback Mechanisms: Encouraging customer
marketing to reach potential customers, promote feedback to improve service and offerings, as well
special events, and engage with the community. as responding to reviews to enhance reputation.
 EXAMPLE: A COFFEE SHOP
Human Resource Facility
Technology
Management Management
Development
Recruitment and Training: Hiring skilled Ambiance and Design: Creating a
baristas and support staff, with a focus on Point-of-Sale Systems: Implementing efficient comfortable and inviting space that
training them in customer service, product POS systems for smooth transactions, inventory encourages customers to stay and socialize,
knowledge, and brewing techniques. tracking, and sales analytics. including thoughtful interior design and
seating arrangements.
Employee Retention: Creating a positive Mobile Apps and Online Ordering: Developing
work environment with opportunities for or utilizing apps for ordering ahead, loyalty Maintenance and Cleanliness: Regularly
growth, benefits, and incentives to reduce programs, and promotions to enhance maintaining equipment and ensuring a
turnover and build a dedicated team. convenience for customers. clean environment to enhance the customer
experience and meet health standards.

Supplier Financial
Management Management

Building Relationships: Establishing strong Budgeting and Cost Control: Managing finances
partnerships with suppliers for coffee beans, effectively, including budgeting for supplies,
pastries, and other ingredients to ensure quality and labor, and marketing to ensure profitability.
reliability. Sales Analysis: Regularly analyzing sales data to
Sourcing Practices: Prioritizing ethical and understand customer preferences and adjust
sustainable sourcing, which can enhance the brand’s offerings or pricing accordingly.
reputation and appeal to environmentally conscious
customers.