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Creating your Companies: VALUE CHAIN

Using Porter's Value Chain


To identify and understand your ompany's !alue hain" follo# these steps$
%tep & ' Identify su()ati!ities for eah primary ati!ity
*or eah primary ati!ity" determine #hih speifi su()ati!ities reate !alue$ There are three different
types of su()ati!ities:
Direct activities create value by themselves. For example, in a book publisher's
marketing and sales activity, direct sub-activities include making sales calls to
bookstores, advertising, and selling online.
Indirect activities allow direct activities to run smoothly. For the book publisher's
sales and marketing activity, indirect sub-activities include managing the sales force
and keeping customer records.
Quality assurance activities ensure that direct and indirect activities meet the
necessary standards. For the book publisher's sales and marketing activity, this might
include proofreading and editing advertisements.
%tep + ' Identify su()ati!ities for eah support ati!ity$
*or eah of the Human ,esoure -anagement" Tehnology .e!elopment and Prourement support
ati!ities" determine the su()ati!ities that reate !alue #ithin eah primary ati!ity$ *or e/ample" onsider
ho# human resoure management adds !alue to in(ound logistis" operations" out(ound logistis" and so
on$ As in %tep &" loo0 for diret" indiret" and 1uality assurane su()ati!ities$
Then identify the !arious !alue)reating su()ati!ities in your ompany's infrastruture$ These #ill generally
(e ross)funtional in nature" rather than speifi to eah primary ati!ity$ Again" loo0 for diret" indiret" and
1uality assurane ati!ities$
%tep 2 ' Identify lin0s
*ind the onnetions (et#een all of the !alue ati!ities you'!e identified$ This #ill ta0e time" (ut the lin0s are
0ey to inreasing ompetiti!e ad!antage from the !alue hain frame#or0$ *or e/ample" there's a lin0
(et#een de!eloping the sales fore 3an H, in!estment4 and sales !olumes$ There's another lin0 (et#een
order turnaround times" and ser!ie phone alls from frustrated ustomers #aiting for deli!eries$
%tep 5 ' Loo0 for opportunities to inrease !alue
,e!ie# eah of the su()ati!ities and lin0s that you'!e identified" and thin0 a(out ho# you an hange or
enhane it to ma/imi6e the !alue you offer to ustomers 3ustomers of support ati!ities an internal as #ell
as e/ternal4$
Tip 1:
Your organization's value chain should reect its overall generic business strategies . !o,
when deciding how to improve your value chain, be clear about whether you're trying to set
yourself apart from your competitors or simply have a lower cost base.
Tip 2:
You'll inevitably end up with a huge list of changes. !ee our article on prioritization if you're
struggling to choose the most important changes to make.
Tip 3:
"his looks at the idea of a value chain from a broad, organizational viewpoint. #ur separate
article on value chain analysis takes di$erent look at this topic, and uses an approach that
is also useful at a team or individual level. %lick here to explore this.

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