Michael Porter’s Value-Chain



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Value Chain and the QCT Triangle


VC allows alignment of processes with customers. This generates a quality advantage.
VC focuses cost management efforts.
VC provides for efficient processes which improves the timeliness of operations.

Value Chain Benefits

Identifies value processes

Identifies areas for cost improvement



Value Chain Elements


Customer value added
Margin orientation
Primary activities
Inbound logistics
Operations
Outbound logistics
Sales and marketing
Service and support


Goal of Value Chain

Driven by customer perceptions
Increase margins
Focus on value processess
Distinctive capabilities
Cost advantages
Some examples
Southwest Airlines
Intel Corporation


Value Chain Analysis


Document the activities
Understand the cost and margins at each step.
Use Activity Based Costing
Map the value chain to the industry value chain
Look for core competencies
Map the cost structure
Note that external values drive cost advantages