A value chain is the consecutive steps from creating a final product to delivering it to customers. This chain will help identify every step in the process in which values are added. This includes the sourcing, manufacturing, and marketing steps of products. Any company will do a value chain analysis by evaluating the detailed process involved in every step of its business. Companies use this approach to optimize efficiency and provide customers with the lowest-cost value products. The company also wants to create a tremendous competitive advantage with the help of the value chain.
What are the Factors of the Value Chain?
The chain is divided into two categories: primary and support. Now, both of these categories have sub-categories. Let us look at some of them;
Primary: The primary activities consist of five components, which are crucial for adding value to the final product. Let us see what are the sub-categories of this:
- Marketing and Sales
- Inbound Logistics
- Outbound Logistics
Support: This helps in making the primary approach more effective. When you optimize one of the activities in support, then it benefits at least one of the activities in the primary. There are 4 sub-categories in support activities:
- Human Resources
- Technologies Development.
The value chain concept is crucial for strategic planning, helping organizations identify areas where they can create the most value for customers and achieve a sustainable competitive advantage in the market. Organizations can gain a competitive advantage by understanding how these activities contribute to value creation. By optimizing and managing these activities effectively, a company can reduce costs, enhance product or service quality, and differentiate itself from competitors. Strategic chain analysis involves identifying opportunities for cost savings, process improvements, and differentiation. It also allows businesses to understand how changes in one part of the value chain can impact other areas.
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