Value Chain

Understanding the value chain - A comprehensive guide

The value chain is a concept developed to analyse the activities within a company in order to determine their contribution to the final product or service. In this glossary article, we will take a closer look at the value chain, its importance and how it is applied in the business world.

What is the value chain?

The value chain is a model designed by Michael Porter. It provides an overview of all the activities that a product or service goes through from raw material procurement to sale. These activities are systematic and organised into a chain, each of which adds value to the final product. It includes primary activities such as inbound logistics, operations, outbound logistics, marketing and sales, as well as services and secondary activities such as company infrastructure, human resources, technology development and procurement.

Why is the value chain important?

A precise value chain enables a company to identify the specific activities that add the most value to its products and services. This leads to efficient resource allocation, faster processes and, ultimately, more profitable business results. It also helps identify opportunities for differentiation to gain a competitive advantage over competitors.

Application of the value chain in the business world

The application of the value chain in the business world is broad and varies depending on the industry and business model. Companies use the value chain to optimise business processes, reduce costs and increase quality, which leads to higher customer satisfaction.

In e-commerce, the value chain can be used to determine which activities contribute to customer satisfaction, whether it is a responsive website, fast delivery times or excellent customer service. In the manufacturing industry, the value chain is used to identify bottlenecks in the production chain that can be eliminated to speed up the production process and improve quality.

Conclusion

The value chain is an important tool that helps companies operate effectively and efficiently. It enables companies to optimise their internal processes, reduce costs, improve quality and gain a competitive advantage. A thorough understanding and application of value chains can lead to performance improvements that benefit both companies and customers.