Value chain

Value chain

The value chain is a concept from business management developed by  Michael Porter, the goal of the value chain is to look at how firm’s business activities can create value  to their products as the reducing costs of business activities to increase profit and efficiency.

The value chain is analysis of a Firm Inbound logistics, operations, and outbound logistics, Marketing and Sales, Services  that are activities that add value to products and can create a competitive advantage for a firm. The support activities of a firm, Procurement, technology development, human resource management and the firm infrastructure that can be more efficient to gain cost savings.

Inbound Logistics, this includes the receiving, warehousing, and inventory control of product or the raw materials need  to make them.

Operations, are the facilities that are used to create value to the products form  Inbound Logistics, e.g. Toyota has manufacturing plants so that they can to steel into cars.

Outbound Logistics, this how a firm gets their product to end user (the customer), by transport, warehousing , etc.

Marketing and Sales, the activities associated with promoting, advertising, selling the needs and benefits of a product to get consumers to buy.    

Service, the add extra’s to sell value of a product such as repairs services, warranty and customer support.

Support Activates, these are what help the above to faction and support them.

 Procurement, are the purchasing of raw materials and other inputs to made in value add products.

Technology Development, this is any research and development, technical process,  and technology bought by the firm to support the value adding operations.

Human Resource management, the activity of recruiting, hiring, development of staff.

Firm Infrastructure, the firm’s areas of legal, finance, quality and management  etc.   

After a firm has done analysis on all of this factors they can see whether there is a better way of adding value to their product, such as cheaper suppliers or distribution methods or if they can cut costs to the firm by making the Support activities more efficient by adding new technology to make the production time fast or higher. Once one or both of these have been done the cost of business goes down making the firms products more competitive and increases their profitability.