Value Chain Framework

Developed by Michael Porter in his 1985 book “Competitive Advantage: Creating and Sustaining Superior Performance,” the Value Chain Framework is a powerful concept used in strategic management to analyze and optimize a company’s internal processes. The value chain concept suggests that businesses operate by performing a series of interconnected activities that create value for customers, and by analyzing these activities, firms can identify opportunities for cost reduction, differentiation, and competitive advantage. Here’s an overview of the key components and principles of the value chain framework:

1. Definition:

o A value chain represents the step-by-step journey of transforming an idea into a finished product or service.

o It encompasses all activities involved, from initial design to customer delivery.

o The goal is to create a competitive advantage by maximizing value while minimizing costs.

2. Primary Activities:

o Inbound Logistics: Activities related to receiving, storing, and distributing inputs or raw materials for production.

o Operations: Activities involved in converting inputs into finished products or services.