Developed by Michael Porter, Value Chain Analysis is strategic management framework used to analyze the processes and key activities performed by a business or industry. This framework illustrates where value is created within an industry or company.
The conventional view of the Porter Value Chain (depicted in a multi-level chevron diagram) captures 5 primary activities and 4 support (secondary) activities:
Primary Activities
• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing & Sales
• Service & After Sales Support
Support Activities
• Firm Infrastructure
• Human Resource Management
• Technology Development (IT)
• Procurement
Through Value Chain Analysis, we can identify areas of competitive advantage (or disadvantage) by benchmarking cost drivers. It also provides a structure for performing competitive analysis by separating the value generating stages. This analysis also allows your organization to analyze opportunities for backward and forward integration by including suppliers and end-customers in the Value Chain.
Value Chain Analysis also drives strategic hypotheses to answer several critical strategic management questions:
• Where are we, and our competitors, earning money? Why?
• Should we forward or backward integrate?
• Should we outsource or spin-off value activities (i.e. business processes)?
• What are the industry critical success factors?
• What are our managerial action plans to control costs, improve service, and increase delivered value?
This Value Chain Analysis PPT presentation breaks down a 4-step process to Value Chain Analysis:
1. Identify the industry Value Chain and map the linkages between the industry value activities.
2. Assign costs, revenues and assets to value activities.
3. Determine the relevant cost drivers for each value activity.
4. Identify potential competitive advantages by either controlling cost drivers better than competitors or reconfiguring the value chain to better leverage the organization's strengths.
Value Chain Analysis is a powerful tool in Strategic Management. This PowerPoint presentation provides an in-depth explanation of the framework with detailed examples and is the same training material used by global management consulting firms.
This presentation also includes detailed industry examples, such as the paper products industry, to illustrate practical applications. It emphasizes the importance of identifying cost drivers and understanding competitive trends to optimize your value chain strategy.
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Source: Best Practices in Value Chain Analysis, Value Chain, Michael Porter's Value Chain PowerPoint Slides: Value Chain Analysis PowerPoint (PPT) Presentation Slide Deck, LearnPPT Consulting
This PPT slide provides an overview of Value Chain Analysis, detailing its definition, benefits, and limitations. It starts by explaining what a value chain is, emphasizing that it outlines the processes and activities that generate value within an industry or organization. The description highlights that value chains are typically represented as linear flows, showcasing both primary and support activities. It stresses the importance of quantifying value, focusing on costs and revenues at each stage.
The slide outlines several strategic questions that Value Chain Analysis can help answer, such as understanding where profits are generated and whether to integrate operations or outsource certain activities. This analytical framework is positioned as a tool for identifying areas for improvement and evaluating critical success factors within the industry.
On the right side, the slide lists the strengths and limitations of Value Chain Analysis. Among the benefits, it notes that the framework aids in structuring competitive analysis, identifying cost drivers, and exploring integration opportunities with suppliers and customers. These insights can help organizations benchmark their performance and enhance operational efficiency.
However, the slide also addresses significant limitations. It points out the challenges related to data collection, which can be extensive and not readily available. Additionally, it mentions difficulties in comparing performance with competitors, particularly for privately held firms. The slide concludes by acknowledging that subsidiaries of larger firms may have their data aggregated, complicating the analysis further.
Overall, the content provides a foundational understanding of Value Chain Analysis, making it a valuable resource for organizations looking to enhance their strategic decision-making processes.
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