The Value Chain
Developed by Michael Porter and used
throughout the world for nearly 30 years, the value chain is a powerful tool for
disaggregating a company into its strategically relevant
activities in order to focus on the sources of competitive
advantage, that is, the specific activities that result in higher
prices or lower costs.
A company’s value chain is typically part of a larger value
system that includes companies either upstream (suppliers)
or downstream (distribution channels), or both. This
perspective about how value is created forces managers to
consider and see each activity not just as a cost, but as a step
that has to add some increment of value to the finished
product or service.