Michael Porter S Value Chain Final
Michael Porter’s
Value Chain
History of Value Chain
• Popularized by Michael Porter’s book best seller “Competitive
•
•
Advantage” 1985
Creator of “5 Forces model”
Helped Gereffi in the late 1990s develop Global Value Chain.
Michael Porter’s Background
• Born May 23, 1947 in Ann Arbor, Michigan
• Received MBA in 1971 Harvard Business School
• Competition and company strategy
• 6 time winner of the McKinsey Award
Value
• The Value is the extent to which a good or
service is perceived by its customer to meet his or her needs or wants, measured by customer's willingness to pay for it.
Valu e What is a Value Chain?
Value Chain
A chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
Value Created and Captured – Cost of Creating that Value = Margin
2 Distinct Sets of Activities
5
Primary
Activitie s &
4
Support
Activitie
Primary Activities(5)
Inbound Logistics- receiving, storing incoming goods
Operations- value creating activities that transform the inputs into the final product.
Outbound Logistics- activities is required to get the finished product to customer
Marketing&Sales- getting buyers to purchase the product.
Service- maintain & enhance the product’s value such as customer support, and repair service.
*Supporting Activities(4)
•
•
•
•
Procurement(purchasing)- the function of purchasing the raw materials and other inputs used in the value creating activities
Technology developmentresearch and development
Human resource management- recruiting, development, and compensation of employees
Firm Infrastructure- finance, legal, accounting
*Some may view supporting activities as “overhead”
Why is value chain important?
• Profits-$$$$$$
• Competitive Advantages
Value Chain
History of Value Chain
• Popularized by Michael Porter’s book best seller “Competitive
•
•
Advantage” 1985
Creator of “5 Forces model”
Helped Gereffi in the late 1990s develop Global Value Chain.
Michael Porter’s Background
• Born May 23, 1947 in Ann Arbor, Michigan
• Received MBA in 1971 Harvard Business School
• Competition and company strategy
• 6 time winner of the McKinsey Award
Value
• The Value is the extent to which a good or
service is perceived by its customer to meet his or her needs or wants, measured by customer's willingness to pay for it.
Valu e What is a Value Chain?
Value Chain
A chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
Value Created and Captured – Cost of Creating that Value = Margin
2 Distinct Sets of Activities
5
Primary
Activitie s &
4
Support
Activitie
Primary Activities(5)
Inbound Logistics- receiving, storing incoming goods
Operations- value creating activities that transform the inputs into the final product.
Outbound Logistics- activities is required to get the finished product to customer
Marketing&Sales- getting buyers to purchase the product.
Service- maintain & enhance the product’s value such as customer support, and repair service.
*Supporting Activities(4)
•
•
•
•
Procurement(purchasing)- the function of purchasing the raw materials and other inputs used in the value creating activities
Technology developmentresearch and development
Human resource management- recruiting, development, and compensation of employees
Firm Infrastructure- finance, legal, accounting
*Some may view supporting activities as “overhead”
Why is value chain important?
• Profits-$$$$$$
• Competitive Advantages