Porter's Value Chain

6 Key excerpts on "Porter's Value Chain"

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  Innovation Strategy for Enterprises in Emerging Economies

  Case Studies for the Digital Age

  • Anurag Satpathy, Arjun Agrawal, Sanjay Mohapatra(Authors)
  • 2015(Publication Date)
  • Emerald Group Publishing Limited

    (Publisher)

  Understanding how a company 1 creates value and looks for ways to add more value are critical ele-ments in developing a competitive strategy. This was discussed by Michael Porter in his in fl uential 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance where he fi rst introduced the concept of the value chain. A value chain is a chain of activities performed by a fi rm or an organization, operating in a speci fi c industry, so as to deliver a valu-able product or service for the customers and links them to the com-petitive position of the organization. It ranges from procuring raw material to sales of the product and further service. It displays total revenue and consists of value activities and margin. Michael Porter proposed a general purpose value chain that organizations can use to examine all of their activities, and see how they are connected ( Figure 1.1 ). The way in which value chain activities are performed determines the costs and affects the pro fi ts. Hence, this tool helps an organization to understand its sources of value. “ The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or ser-vice) organization as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisi-tion and consumption of resources À money, labour, mate-rials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects pro fi ts ” À IfM, Cambridge. Most of the organizations engage in many activities in the process of converting input material to fi nal product. Michael Porter identi-fi ed some key activities in the business process linked with one other which are the main value creators throughout the process.

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  Operations Management

  A Modern Approach

  • Rae Simons(Author)
  • 2011(Publication Date)
  • Apple Academic Press

    (Publisher)

  Support activities span the entire organi-zation, as shown in Figure 2. For example, technology development initiatives could attempt to optimize business activities such as fleet management (inbound/ outbound logistics), assembly line operation (operations), sales processing (mar-keting and sales), and help desk (service). In addition, technology optimization may be used in streamlining operations and freeing up resources for the strategic initiatives that drive growth and competitive advantage, and accelerate time to business outcomes (HP, 2007). Margin refers to the potential profit margin that an organization could realize through the sale of its product or service, provided the customer is willing to pay more than the cost of the good sold (i.e. cost of all value chain activities involved, from start to finish, in selling a good). Figure 2: Porter’s Value Chain (Source: Porter, 1985) Organizations search constantly for technological opportunities that could yield a lower cost of the goods sold, increased revenue, or improved customer satisfaction, all of which would translate into strengthening a firm’s viability. The next section examines how mobile technology can impact an organization’s value chain in these areas. Mobile Technology and the Value Chain In a landmark paper, Porter examines the impact of the Internet on the competi-tive positioning of a firm (Porter, 2001). In this work he argues that the basic tool 228 Operations Management: A Modern Approach for understanding the impact of information technologies, such as the Internet, on companies is the value chain. According to this approach, the impact of infor-mation technologies on a company can be assessed by examining the influence of such technologies on the primary and support activities in the value chain. Here, we employ this approach to gain an understanding into the impact of mobile technologies on companies.

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  The Wiley Handbook of Global Workplace Learning

  • Vanessa Hammler Kenon, Sunay Vasant Palsole, Vanessa Hammler Kenon, Sunay Vasant Palsole(Authors)
  • 2019(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  1998 ). The Porter value chain model, when adapted to talent management, resulting in the creation of the talent value chain, holds the same relevance and applicability to different industries. The activities in the value chain that are vital to the firm's competitive advantage are industry‐dependent.

  Historically, the term value chain is defined as the collaborative relationship between business and consumers (Koc & Bozdag, 2017 ; Stabell & Fjeldstad, 1998 ; Zamora, 2016 ). This definition has been criticized for lacking specificity in also defining the inherent linkages between causal linkages of the value‐creation process. The talent value chain is adapted from the Porter value chain and forms a collaborative network of talent management processes and decision points inherent in the day‐to‐day management of talent in organizations. Key characteristics of the value chain are the TM activities and actors involved in delivering TM services, which provides value‐added benefits for the talent and the organization. The talent value chain concept is a new field of study with limited or no extant literature, which precludes a comprehensive understanding of the opportunities and vulnerabilities within the value chain. Figure 9.3 represents the talent value chain adapted from the Porter value chain. It illustrates the primary and support activities and processes required to drive efficiency and value in local and global talent management.

  Figure 9.3

  The talent value chain.

  The TVC utilizes the vertical linkages when the firm seeks to leverage its competitive advantage using internal resources and strategies inherent in its value chain components. Configuration of the value chains depends on the firm's talent strategies, the TM approach it is pursuing and its associated defined processes. This explains why no two organization can have the same talent value chain. Reengineering the value logic to deliver TM activities can lead to significant cost savings and boost operational efficiency for organizations with the insight to pursue such a path.

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  Business Strategy and Competitive Advantage

  A Reinterpretation of Michael Porter's Work

  • Jovo Ateljević, Dženan Kulović, Filip Đoković, Mirza Bavčić(Authors)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  This has led Michael Porter to transfer the idea to a company as a whole, proving that there is a necessity for a separate research of each individual activity in order to determine the sources of competitive advantage (Tipurić et al., 2010). Such an approach creates the possibility of treating the value chain as a separate unity, but keeping in mind that the company value chain is just a part of industry chain forming the following: (a) Upstream value, (b) channel value and (c) downstream value. Sustaining competitive advantage depends on the manner in which the company manages its own value chain. This leads to the creation of the value system. The basis of business operations is the business model which is most accurately described by the configuration of activities. Today, it is possible to measure and quantify the contribution of each individual activity due to modern development. Michael Porter defines the activity configuration as a value chain. Value chain, in its formation phase, copied the value chain rationale called the thread (French filirere), which describes the physical flow of the input, operations and output reflecting the relations in a particular period of time. Value chain 5 is a concept that facilitates the disaggregation of a business into strategically relevant activities. The process offers an easier way of considering the value chain and identifying the activities where there is a key competence which can be exploited through business strategy. Focusing on the activities within the value chain provides an insight into activities which can be utilised to create competitive advantage. Value chain generates a value which represents the amount a buyer is willing to pay for the product

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  Strategic Operations Management

  A Value Chain Approach

  • David Walters, Mark Rainbird(Authors)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  Using the value chain for strategic analysis Market opportunity analysis The review of the industry value drivers is part of a larger review of product-market and process based opportunities. Market opportunity analysis also includes an assessment of the assets, process and core capabilities that are STRATEGIC OPERATIONS MANAGEMENT 198 Adding value to customers Communicate the value Produce the value Create the value Identify value expectations Service the value Deliver the value Quality Build-to-order Product platform Modular construction Standard components Use existing & proven proprietary components Local ‘availability’ information Value proposition Influence operating costs Reliability Service information Time-to market ‘Customisation’ Innovative products & service Flexible response Flexible response Order response time Order response time Product-service availability ‘Design’ service support concurrently with product design Increase costumer performance Logistics Service Marketing Procurement Production Figure 8.2 Integrating the customer facing processes that create added value Figure 8.3 A generic industry value chain design: roles and tasks Marketing • Brand development and management • Market knowledge • Market development • Customer communication Procurement • Sourcing • Negotiating • Transaction • Management Logistics • Availability • Frequency • Reliability • Stocks • Flows Customer & stakeholder value delivery perceptions Service • Customer care • Customer loyalty programmes Customer and stakeholders expectations Inputs and resources Processes, capabilities and assets Design and development • Product and process design • Value-in-use profiling • Customisation/ differentiation • Price/cost issues • ‘Logistics’ issues Production • Identifying & matching capabilities • Matching capacity management • Quality management • ‘Service’ requirements Planning, coordination and control

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  Supply Chain Costing and Performance Management

  • Gary Cokins, Terry Pohlen, Tom Klammer(Authors)
  • 2021(Publication Date)
  • Wiley

    (Publisher)

  value chain analysis (VCA) is used when referencing this technique since previous studies, much of the accounting literature, and many executives also use this terminology.

  An Example

  To illustrate, consider the supply chain for gasoline. It starts with exploring and finding crude oil, developing the field, producing (pumping) oil, and transporting (via a pipeline or a tanker) to a refining facility, where it is converted into gasoline (and other products). The gasoline is then transported to a storage terminal from where it is transported again to retail gas stations or other outlets and sold as branded or unbranded product. Exhibit 8.1 depicts the value chain for gasoline. Firms may be positioned in one, two, or even all the steps within a value chain.

  EXHIBIT 8.1

  A Simplified Value Chain for Gasoline

  Source: Shahid Ansari, Jan Bell, and Thomas Klammer, “Value Chain and Strategic Cost Management,” in the modular series Management Accounting: A Strategic Focus (Ansari, Bell, Klammer; Lulu.com ).

  Dealing with Rising Costs

  Rising costs across their supply chains, as well as increasing pressure to find ways to reduce these costs, confront supply chain managers. Typically, they have focused inward when attempting to reduce costs. Reducing headcount, streamlining internal processes, and seeking lower‐cost suppliers are common approaches when seeking cost reductions. Having said this, many managers recognize that this traditional perspective misses opportunities for cost reduction elsewhere in the supply chain. Executives must consider how their firm can work with other trading partners to reduce supply chain costs. The approach that has proven most successful combines supply chain costing and VCA within the context of individual supply chain processes.

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