Tuesday, May 11, 2010

Value Chain: A Strategic Tool Snapshot

Value Chain is a strategic tool that was developed by Michael E. Porter in 1980's. The tool is wonderful to understand the competitive advantage of an organisation. This tool divides the activities in two parts viz. Primary and Support activities. These activities add value to the product/ services organisation produces and makes the end product/ services available to the consumer.
Among Primary activities are: Inbound Logistics, Operations, Outbound Logistics, Sales & Marketing and Services. These activities are actual doers. The main business run on these activities and in its absence the business can not function effectively.But to enable effective functioning of Primary activities, some support activities are required. Among Support activities are: Procurement, Firm Infrastructure, Technology Development and Human Resource Management.
Put together these activities ensure the optimum functioning of the organisation resulting in increased margins and effective products/ services.
This tool also indicates that if all departments are not competitors but really are the complements to each other.
Value chains of different organisations but in same supply chain put togther will create a value system. This system confirms the effective working of all value chains or which link is weak and needs attention to gain 'Competitive Advantage'.
Ref.: 'Competitive Advantage: Creating and Sustaining Superior Performance' by Michael E. Porter.

No comments:

Post a Comment