Value chain: understanding and applying this business model
Posted: Tue Dec 24, 2024 6:31 am
In today’s competitive business environment, understanding what creates value for customers is a crucial step to achieving success. This is where the Value Chain comes in. It’s a concept that helps companies understand the process they go through to add value to their products or services. In this article, we’ll explore what the value chain is, the steps involved, and how to apply this model to your organization.
Summary
Understanding the Value Chain
Primary Activities in the Value Chain
Support Activities in the Value Chain
Building and Optimizing Your Value Chain
Understanding the Value Chain
The Value Chain is a theoretical model that describes how companies line database produce value from their operational activities. It was introduced by economist and Harvard professor Michael Porter in 1985, becoming an essential tool for visualizing and analyzing an organization's value creation process.
In its simplest definition, the value chain is a series of activities that a company performs to create and deliver a product or service to the market. These activities are divided into two groups: primary activities, which are directly involved in the production and delivery of products or services, and supporting activities, which provide support to the primary activities.
Primary Activities in the Value Chain
Primary activities are the steps that directly contribute to creating value in the final product or service. They can be divided into five main steps:
Internal logistics : At this stage, companies receive, store and distribute the raw materials needed for production.
Operations : Here, raw materials are transformed into final products. This may involve manufacturing, assembly, quality testing, packaging, among other processes.
Outbound logistics : After products are manufactured, they need to be stored and distributed to retailers or directly to the end customer.
Marketing and sales : This stage involves all activities aimed at promoting the product or service and persuading customers to buy.
Service : The final step involves customer support activities after purchase, such as maintenance services, technical support, and warranties.
Read also: Multichannel Marketing: What It Is and Why It's Important for Your Company's Growth + BONUS
Support Activities in the Value Chain
While primary activities are directly responsible for creating and delivering products or services, supporting activities provide the support needed to ensure that these primary activities occur efficiently and effectively. They include:
Company infrastructure : Includes activities such as strategic planning, accounting and finance, legal and quality relations, among others.
Human Resource Management : Involves hiring, training, evaluating, and compensating the company's employees.
Technology development : Refers to investment in research and development, automation, information technology and other technological innovations.
Procurement : This support activity involves obtaining resources and materials necessary for the operation of the company.
Building and Optimizing Your Value Chain
Now that we understand what the value chain is and its main activities, let's see how you can build and optimize your company's value chain:
Identify activities : The first step is to list all the primary and supporting activities that your company performs. This process will help you get a clear picture of how value is created in your organization.
Analyze the connections between activities : Next, analyze how each activity connects to the others and how they contribute to creating value for the customer. This will allow you to see where there may be inefficiencies or opportunities for improvement.
Identify associated costs : For each activity, identify the associated costs. This step can reveal where most of your resources are being invested and where you may be able to realize savings.
Identify high-value activities : Determine which activities contribute the most to customer perceived value. These are the areas you should focus on to increase customer value.
Develop strategies to optimize the value chain : Based on your analysis, develop strategies to improve efficiency, increase quality, reduce costs, and increase the overall value you deliver to your customers.
Read also: After all, what is a niche in digital marketing?
Understanding the value chain and how each activity contributes to creating customer value is critical for any business. With this understanding, you can optimize your operations and strategies to maximize the value you deliver, thereby increasing your competitive advantage and the long-term success of your company.
In short, the value chain is a fundamental strategic instrument that allows companies to identify, analyze and optimize the activities that contribute to value creation.
With a deeper understanding of how these activities interact and how they impact customer perceptions of value, companies are better equipped to improve efficiency, reduce costs and, ultimately, deliver products and services that exceed customer expectations.
By considering each stage of the value chain, from internal logistics to after-sales service, companies can stand out in a competitive market and ensure sustainable long-term growth.
Summary
Understanding the Value Chain
Primary Activities in the Value Chain
Support Activities in the Value Chain
Building and Optimizing Your Value Chain
Understanding the Value Chain
The Value Chain is a theoretical model that describes how companies line database produce value from their operational activities. It was introduced by economist and Harvard professor Michael Porter in 1985, becoming an essential tool for visualizing and analyzing an organization's value creation process.
In its simplest definition, the value chain is a series of activities that a company performs to create and deliver a product or service to the market. These activities are divided into two groups: primary activities, which are directly involved in the production and delivery of products or services, and supporting activities, which provide support to the primary activities.
Primary Activities in the Value Chain
Primary activities are the steps that directly contribute to creating value in the final product or service. They can be divided into five main steps:
Internal logistics : At this stage, companies receive, store and distribute the raw materials needed for production.
Operations : Here, raw materials are transformed into final products. This may involve manufacturing, assembly, quality testing, packaging, among other processes.
Outbound logistics : After products are manufactured, they need to be stored and distributed to retailers or directly to the end customer.
Marketing and sales : This stage involves all activities aimed at promoting the product or service and persuading customers to buy.
Service : The final step involves customer support activities after purchase, such as maintenance services, technical support, and warranties.
Read also: Multichannel Marketing: What It Is and Why It's Important for Your Company's Growth + BONUS
Support Activities in the Value Chain
While primary activities are directly responsible for creating and delivering products or services, supporting activities provide the support needed to ensure that these primary activities occur efficiently and effectively. They include:
Company infrastructure : Includes activities such as strategic planning, accounting and finance, legal and quality relations, among others.
Human Resource Management : Involves hiring, training, evaluating, and compensating the company's employees.
Technology development : Refers to investment in research and development, automation, information technology and other technological innovations.
Procurement : This support activity involves obtaining resources and materials necessary for the operation of the company.
Building and Optimizing Your Value Chain
Now that we understand what the value chain is and its main activities, let's see how you can build and optimize your company's value chain:
Identify activities : The first step is to list all the primary and supporting activities that your company performs. This process will help you get a clear picture of how value is created in your organization.
Analyze the connections between activities : Next, analyze how each activity connects to the others and how they contribute to creating value for the customer. This will allow you to see where there may be inefficiencies or opportunities for improvement.
Identify associated costs : For each activity, identify the associated costs. This step can reveal where most of your resources are being invested and where you may be able to realize savings.
Identify high-value activities : Determine which activities contribute the most to customer perceived value. These are the areas you should focus on to increase customer value.
Develop strategies to optimize the value chain : Based on your analysis, develop strategies to improve efficiency, increase quality, reduce costs, and increase the overall value you deliver to your customers.
Read also: After all, what is a niche in digital marketing?
Understanding the value chain and how each activity contributes to creating customer value is critical for any business. With this understanding, you can optimize your operations and strategies to maximize the value you deliver, thereby increasing your competitive advantage and the long-term success of your company.
In short, the value chain is a fundamental strategic instrument that allows companies to identify, analyze and optimize the activities that contribute to value creation.
With a deeper understanding of how these activities interact and how they impact customer perceptions of value, companies are better equipped to improve efficiency, reduce costs and, ultimately, deliver products and services that exceed customer expectations.
By considering each stage of the value chain, from internal logistics to after-sales service, companies can stand out in a competitive market and ensure sustainable long-term growth.