Michael Porter
Michael Porter’s Value Chain and Gaining a Competitive Advantage
The more value an organization creates, the more profitable that organization likely will be and by providing more value to your customers, the organization is gaining a competitive advantage. Understanding how your company creates value and looking for ways to add more value are critical elements in developing a competitive strategy. The concept was first introduced by Michael Porter in his 1985 book “Competitive Advantage.” A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain in which he felt it was important for companies to examine all of their activities and see how they’re connected. According to Porter, going through the chain of organization activities will add more value to the product and services than the sum of added cost of these activities. And thus, the company will gain marginal value for that product or service and ultimately gain the competitive advantage on the product or service. The value chain framework can be used as an analysis tool for the strategic planning and to build the organizational model for an effective leadership model. The value chain concept can be applied to the individual business unit and extended to the whole supply chains and distribution networks as well. To form a successful product or service, it is important to add value in each activity that product or service goes through during the life cycle. The best possible value can be achieved in the product development process by adding value at each stage of the process. Porter’s generic value chain was divided into primary and support activities. The primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. These activities relate directly to the physical create, sale, maintenance and support of a product or service. The support activities are procurement or
The more value an organization creates, the more profitable that organization likely will be and by providing more value to your customers, the organization is gaining a competitive advantage. Understanding how your company creates value and looking for ways to add more value are critical elements in developing a competitive strategy. The concept was first introduced by Michael Porter in his 1985 book “Competitive Advantage.” A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain in which he felt it was important for companies to examine all of their activities and see how they’re connected. According to Porter, going through the chain of organization activities will add more value to the product and services than the sum of added cost of these activities. And thus, the company will gain marginal value for that product or service and ultimately gain the competitive advantage on the product or service. The value chain framework can be used as an analysis tool for the strategic planning and to build the organizational model for an effective leadership model. The value chain concept can be applied to the individual business unit and extended to the whole supply chains and distribution networks as well. To form a successful product or service, it is important to add value in each activity that product or service goes through during the life cycle. The best possible value can be achieved in the product development process by adding value at each stage of the process. Porter’s generic value chain was divided into primary and support activities. The primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. These activities relate directly to the physical create, sale, maintenance and support of a product or service. The support activities are procurement or