Value chain model

Value chain Model developed by M.E. Porter presents in a simplified way enterprise as a sequence of activities (processes), arranged in the sequence of phases from the sourcing of raw materials, materials and technology by processing them into final products and supplying to the customer. In value chain there are basic functions (primary processes), which include: receiving raw materials and components, production, sales and service.

This model allows in a simplified way to present the successive phases of the company activity. Those phases are considered primary functions. Porter has also indicated support functions, i.e. management and advisory activities.

Primary functions, depending on the specifics of the enterprises are varied, including the transformation of raw materials, acquired technology for the finished products.

Primary processes

Overall, the company's basic functions can be divided into:

• preparatory activities
• production
• sale

Above processes can be described in more details. And so as part of preparatory activities, we can distinguish:

• research and development
• product design
• purchases of raw materials
• transport of raw materials to manufacturing plant
• acquisition of financial resources, etc.

As part of the production we can distinguish:

• the production and storage of components and parts
• installation
• internal transport
• packaging
• storage of finished products

In the sales function, we can distinguish:

• distribution
• transport to the final recipients
• service
• user support

Support functions

Support functions include: strategic management, financial management, office support functions, IT management, HR management, marketing strategy development, technology development, financial management.

Applications

The main functions of the value chain analysis of the activities of the company are:

• analysis of external coordination, aimed at improving the company's cooperation with suppliers, customers, and competitors
• analysis of activities in the sphere of management to improve coordination,
• analysis of the costs and losses that arise in the individual phases, allowing the identification of cells responsible for extra costs
• development of the change strategy for achieve competitiveness.

See also:

• Brand value chain

Value chain model — recommended articles

Operational management — Logistics system — Integrative function of logistics — Industry — Business environment — Added value chain — Process innovation — Supplier — Distribution plan

References

• Olla, P., & Patel, N. V. (2002). A value chain model for mobile data service providers. Telecommunications Policy, 26(9), 551-571.