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Value Chain Analysis in Strategy

Value chain analysis describes how a business is divided into primary and support activities to understand its competitive strengths. Primary activities like component assembly directly create and deliver products, while support activities like human resource management increase efficiency. Value chain analysis identifies which activities a business should undertake itself and which are better outsourced. It involves breaking a business into key activities, assessing value added through cost or differentiation advantages, and determining strategies focused on sustainably advantageous activities.

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6 views1 page

Value Chain Analysis in Strategy

Value chain analysis describes how a business is divided into primary and support activities to understand its competitive strengths. Primary activities like component assembly directly create and deliver products, while support activities like human resource management increase efficiency. Value chain analysis identifies which activities a business should undertake itself and which are better outsourced. It involves breaking a business into key activities, assessing value added through cost or differentiation advantages, and determining strategies focused on sustainably advantageous activities.

Uploaded by

rathiimahesh
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

strategy - value chain analysis

Introduction
Value Chain Analysis describes the activities that take place in a
business and relates
them to an analysis of the competitive strength of the business.
Influential work by
Michael Porter suggested that the activities of a business could be
grouped under two
headings:
(1) Primary Activities - those that are directly concerned with
creating and delivering
a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in
production, may
increase effectiveness or efficiency (e.g. human resource
management). It is rare for a
business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best
undertaken
by a business and which are best provided by others ("out sourced").

Steps in Value Chain Analysis


Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organization into its key activities under each
of the major
Headings in the model;
(2) Assess the potential for adding value via cost advantage or
differentiation, or
identify current activities where a business appears to be at a
competitive
Disadvantage;
(3) Determine strategies built around focusing on activities where
competitive
Advantage can be sustained

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