Analyzing the Activities of a Firm

Value Chain

Summary of the VC Framework by Porter. Abstract

Michael Porter

Value Chain framework model The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.

Inbound Logistics

Includes receiving, storing, inventory control, transportation scheduling.
Operations

Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product.

Outbound Logistics

The activities required to get the finished product to the customers: warehousing, order fulfillment, transportation, distribution management.

Value Chain model of Michael Porter: Marketing and Sales

The activities associated with getting buyers to purchase the product including channel selection, advertising, promotion, selling, pricing, retail management, etc.
Service

The activities that maintain and enhance the product's value, including customer support, repair services, installation, training, spare parts management, upgrading, etc.
Procurement

Procurement of raw materials, servicing, spare parts, buildings, machines, etc.
Technology Development

Includes technology development to support the value chain activities, such as Research and Development, Process automation, design, redesign.

Value Chain model of Michael Porter: Human Resource Management

The activities associated with recruiting, development (education), retention and compensation of employees and managers.

Firm Infrastructure

Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc.

From a Value Based Management point of view, the Value Chain Framework helps to build a relative competitive advantage, together with Porter's Competitive Advantage thinking. The Value Chain Framework can be seen as one of two dimensions in maximizing corporate value creation. The other value creation dimension is the Market/Industry Attractiveness for which another model from Porter is often used: the Competitive Forces model.

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