A value-chain is a collection of processes that a business or organisation uses to generate revenue. A value chain is a collection of subsystems that work together to create products and services. It encompasses the entire process from start to finish.
Michael Porter created a strategic tool to examine a company’s value chains because of their importance.
Porter sought to define a company’s competitive edge, realizing that it was derived from activities like marketing and support activities. Porter breaks down value chain analysis into five main steps. He then breaks them down into four complementary activities. The major functions of Michael Porter’s value chain are inbound logistics, operations and outbound logistics as well as marketing, sales and service. Each of these five operations has the goal to create more value than it costs, which results in higher profits. Below are the five most critical primary activities.
Inbound logistics covers receiving, warehousing and inventory control for raw materials. This includes all supplier ties. Inbound logistics is, for instance, the receiving and storage of goods from a manufacturer that the eCommerce company intends on selling.
Operation includes the transformation of raw materials into final products or services. This includes all the steps involved in converting inputs into outputs. This could include adding branding to the product or packaging multiple items together in a package.
Outbound logistics is the process of getting a product to a customer. It can be either external or internal. It includes product delivery, storage, and distribution systems. It can include both shipping and keeping the items for delivery, just like the e-commerce business mentioned earlier.
Sales and Marketing
Sales and marketing strategies such as pricing, promotion, advertising and promotion are all included in marketing and sales to target the right customers. These are acts that help customers buy products or services from corporations. The same as above, an ecommerce company might create an email list or run Instagram ads.
All operations, including customer service, maintenance, repair and refund, can be used to maintain products in good condition and enhance the customer experience. An e-commerce company may offer repairs or replacements as well as a warranty.
Secondary Activities From Porter’s Value chain
Secondary activities can be used now to enhance the primary activities of a business’s value chain. The value chain supports activities do exactly what they say: they support the main activities. Every major action has a supporting or secondary activity that performs a function. A function that can be used for marketing, sales, and operations is human resource management. Below are the four optional activities.
- Human Resource Management
- Technological Development
To give a company an advantage in any one of five activities, Michael Porter’s value-chain is used. This will allow it to compete in its industry. This study was intended mainly for businesses that produce goods. Porter’s value-chain analysis can be used to benefit any organization, even those that do not possess all the components.