Value chain analysis porter s value chain the concept of value chain was propagated by michael porter in the 1980s in his book competitive advantage. Smart, connected products are expanding and transcending industry boundaries, disrupting value chains, altering industry. The concept comes through business management and was first described by michael porter in his 1985 bestseller, competitive advantage. The concept of the value chain was made popular by harvard universitys professor michael porter. Mapping of porters value chain activities into business.
For gaining the competitive advantages, porter suggested that going through the chain of organization activities will add more value to the product and services than the sum of added cost of these activities. Topics include supply chain analysis, market segmentation, vertical integration, competitive advantage, and industry transformation. In developing a model that incorporates value, we used michael porters concept of the value chain, defined as a set of activities that an organization engages in to create value for its customers. A series of surveys done by consulting cabinets deloitte touche tohmatsu 1995, or. Porter and kramer, who work as a professor and lecturer respectively at harvard business school, assert. Creating and sustaining superior performance porter, 1985, as a tool of analyzing the firms internal environment and resource base. Creating and sustaining superior performance porter 1985. Porters value chain what is the value chain of porter. All calculations and graphs can be found in the appendices. Swot, porters five forces of competition, debt and current ratios and value chain analysis. Aug 08, 2018 michael porter and mark kramers 2011 article on creating shared value csv constructed what has currently become one of the most influential views on how businesses should operate in society. The value chain also known as porter s value chain analysis is a business management concept that was developed by michael porter. The care delivery value chain cdvc is a framework that allows a systemic analysis of value creation across the myriad of activities that occur during the care of a patient for a specific medical condition.
Pdf on jan 1, 2014, john mcgee and others published value chain find, read and cite all the research you. Value chain michael porter was the first person who introduced the term value chain in his book competitive advantage. A generic, firm specific value chain is shown in figure 1. In michael porters description of the value chain, he identifies the various steps, or links, in the. Porter has suggested many ground breaking strategic concepts like porter s five forces, competitive strategy, and others.
This concept was originally from business management and popularized by michael porter in 1985. Evan zamora jeff dean juliet lachappell nicole skubic tyler. In the ensuing knowledge economy the importance of human capital is being recognized as never. How to reinvent capitalism and unleash a wave of innovation and growth. According to michael porter, value chain consists all. In his 1985 book competitive advantage, michael porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Ifdc report on value chain and business case analysis of agro.
One of his bestknown concepts is the value chain, which is used to deliver a product or service to the market and has three key objectives. You should be familiar with the original model see figure 1 and the activities described within it. Michael porter in 1985, captures a series of actions that a firmin a specific industryaccomplishes to produce a valuable product or service for the market. A value chain is a set of activities that a company performs in order to deliver a valuable product or service for its customers. In the new marketing era, with the rise of retail and ecommerce, companies have realized that your value chain will be further strengthened if you have better coordination between all departments. Application of the hines value chain model by the kenya. As i mentioned in the first part of this series, this model optimizes for. In his book competitive advantage 1985, michael porter explains value chain analysis. Company value chain useful to separate the business system into a series of value generating activities referred to as the value chain. Porters value chain analysis by michael porter toolshero.
Gaining such a perspective sets the groundwork for further analysis of individual institutions with respect to their particular value chain advantage and strategically attractive competitive position. Porters value chain model and competitive advantage in. This course provides an overview of key concepts in strategic management in the construction, real estate, and architecture industries. Below is an overview of some of the more commonly used strategic analysis tools. Porters competitive strategy models five forces model and value chain are two of the competitive strategy models contributed by michael e porter of harvard university professor s of harvard business school. Company value chain useful to separate the business system into a series of valuegenerating activities referred to as the value chain. Porter concluded that most value chains share similar characteristics and contain both production and supporting links. Its a processbased view of an organization, where products move through activities in a sequence and theres value added during each step of the process. Interestingly, the term value system has been as widely accepted as value chain has. Porters value chain assumes that an enterprise is a system of.
However, the chain goes beyond this when i refer to michael porter in his bestselling 1985, competitive advantage. The value chain as a concept disaggregates a firm into its strategically relevant activities. In health care, however, stakeholders have myriad, often conflicting goals, including access to services, profitability, high quality, cost containment, safety, convenience, patientcenteredness, and satisfaction. Moreover, while students educated in social entrepreneurship should be catalysts for this transformation working with practitioners as mentors, advisers, and consultants, a wider change must include rethinking the entire value chain of the business school to create shared value in its operations and societal impact. Value chain presentation template free powerpoint templates. All these activities can be represented using a value chain. Michael porters competitive advantage and business history. The backbone of this model is the set of five primary activities that have been identified as porter as being relevant to all businesses.
The relevant level for constructing a value chain is a firms activities in a particular industry. Three waves of itdriven competition have radically reshaped competition in the past 50 years. A business strategy of through a value chain and comparative advantage analysis of amazons trademarks and intangibles amazon is considered the preeminent online retailer in the world. Well known is porters concept of the value chain, gereffis global commodity. Porter s value chain template for powerpoint and keynote is designed for professional presenters, who are handling business management and corporate management concepts. Porter s value chain is a model that can be used as part of the strategic analysis stage of the strategic planning process and is particularly useful to assess whether an organisation has a sustainable competitive advantage. This course is of interest to students seeking more understanding of the business dynamics of real estate and construction. Porters five forces model and porters value chain sony. Value chains, value streams, value nets, and value. Michael eugene porter born may 23, 1947 is an american academic known for his theories on economics, business strategy, and social causes. A diagram of michael porter s value chain based on an image from porter m.
On the value chain and international specialization of china. Value chain for software product delivery linkedin. The value chain the term value chain was used by michael porter. Value chains, value streams, value nets, and value delivery. Porter, known for porter s five forces, laid out his. Porter defines value chain as a representation of a firms valueadding activities, based on its pricing strategy and cost structure. Porter five forces analysis industry analysis definition, advantages, and criticism. Value chain analysis and competitive advantage article pdf available in journal of general management 271. The value chain was designed by michael porter in 1985 as a systematic way to examine how competitive advantage develops and to identify where value is added in an organisation. Capon 2008 defines value chain as a framework for thinking about. Mar 15, 2011 according to michael porter value is the chain of activities for a company that operates in a specific industry. Now, in the third wave, it is becoming an integral part of the product itself.
This paper is intended as a discussion piece to lead and give legitimacy to more formalized research in this area. As porter and kramer defined the concept, companies can create shared value at three levels. What are the primary activities of michael porters value. The value chain from competitive advantage, by michael. Valuebased health care delivery harvard business school. Michael porter proposed the value chain framework in his book competitive advantage. Porter defined value as the amount buyers are willing to pay for what a firm provides, and he conceived the value chain as the combination of nine generic value added activities operating within a firm activities that work together to provide value to customers. Porter developed the value chain to help identify which activities within the firm were contributing to a competitive. Swot, porter s five forces of competition, debt and current ratios and value chain analysis. The value chain concept was developed and popularized in 1985 by michael porter, in competitive advantage, 1 a seminal work on the implementation of competitive strategy to achieve superior business performance. Corporation porters five forces model and porters value chain 2. Michael porter s competitive advantage and business history robert e. Every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product. A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a product or service for the market.
The purpose of the value chain model, according to porter, was to systematically examine all the activities a firm performs and how they interact as cited in. Value chains in health care article pdf available in journal of consumer marketing 217. Michael porter 1985 introduced in his book the competitive advantage the concept of the value chain and book highlighted that the activities within the organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real. The value chain concept was introduced 30 years ago by michael porter in his 1985 bestseller, competitive advantage. In any field, improving performance and accountability depends on having a shared goal that unites the interests and activities of all stakeholders. T he value chain analysis describes the activ ities the organ ization performs and links them to the organizations competitive pos ition. These activities add value and cost in the process of creating products and services. The term value chain was coined by harvard business school professor michael porter in 1985 to describe the set of activities performed to design, produce, market, deliver, and support products figure 2. Porter harvard business school shared value leadership summit boston, ma may 23, 20 creating shared value as. Food value chain relationships and operating principles3 2 porter, michael e.
Creating and sustaining superior performance new york. Value chain analysis of procter and gamble case study. Porter linked up the value chains between firms to form what he called a. Michael eugene porter is an american academic known for his theories on economics, business strategy, and social causes. Evan zamora jeff dean juliet lachappell nicole skubic.
Porters value chain analysis free management books. The value chain template in powerpoint format includes three slides. He is credited for creating great works, porter s five forces analysis, competitive strategy, national diamond and value chain. Porter s value chain methodology is a powerful management tool, which delineates the concept of value creation.
A companys value chain is typically part of a larger value system that includes companies either upstream suppliers or downstream distribution channels, or both. Advantage creating and sustaining superior performance by michael e. The forward thinking statements and recommendations created by the authors are opinions and suggestions only. He is the bishop william lawrence university professor at harvard business school, and he was one of the founders of the consulting firm the monitor group now part of deloitte and fsg, a social impact consultancy. A short video for accounting and business students identifying the main elements within porters value chain. The value chain concept was first put forward by michael e. All competitive advantage resides in the value chain. Mar 23, 2012 the value chain is a concept from business management thatwas first described and popularized by michael porter. Value chain analysis is one way of identifying which activities are best undertaken by a business and which are best outsourced.
The concept comes from business management and was first described in 1985 by michael porter in his bestseller competitive advantage. The value chain categorizes the genericvalueadding activities of an organization. Most existing big organizations the 800pound gorillas subscribe to michael porter s value chain framework. For further materials, see the website of the institute for strategy and competitiveness. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. Porter has dedicated much of his career to studying competitive advantage.
It is this synergy between activities that produces value, not the activities in themselves. The kenya medical supplies agency from its inception in the year 2000 to the year 2007, adopted the michael porter s value chain model push strategy to supply essential drugs to all the public health facilities in the country. Above is an image of michael porter who presented the concept of value chain. A strategic vision to improve value by organizing around patients needs, health affairs, mar, 20. Creating and sustaining superior performance cite 1 recommendation. Strategic analysis tools topic gateway series 5 one of the key skills of a strategic analyst is in understanding which analytical tools or techniques are most appropriate to the objectives of the analysis. Given the importance of the value chain, michael porter developed a strategic management tool for analyzing a companys value chain. What ought to be done if the creation of business value and social value do not go hand beschorner on porter and kramer 109 bus ethics j rev 117. Porter s value chain is a model used to study the activities that are performed in the creation of a product or service by an organization. You can use the value chain diagram for powerpoint to. Documents in econstor may be saved and copied for your personal. Value chain analysis methodologies in the context of. Kramer 94 disruptive innovation for social change clayton m.
Use of the value chain in the process of generating a. Porter proposed a generalpurpose value chain that companies can use to examine all of their activities, and see how theyre connected. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Value chain analysis of procter and gamble case study value chain analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Some of the material in this paper comes directly from documents that go back over 20 years, including writing by michael porter, james martin, ralph whittle, and david bovet.
The value chain from competitive advantage, by michael porter. Porter distinguished two important elements of modern value chain analysis. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product i. A systematic way of examining all the activities a firm performs and how they interact is evaluated through the concept of value chain. In his book, porter first time introduced value creation concept. Developed in the early 1980s by harvard business school professor michael porter in his book competitive advantage, the value chain consists of two main components.
The concept of a value chain was first described by dr. Strategic management in the design and construction value chain. Michael porters value chain is a series of wellbased actions designed to establish and enhance a certain product or service in the market. As recklies 2001 said, the term value chain was used by michael porter. The value chain notion visualizes the process view of an organization, perceiving a manufacturing or service organization as a system comprised of subsystems of inputs, transformation. The link between competitive advantage and corporate social responsibility michael e. Nov 20, 2012 in his book, stewart tells how in 1969, when michael porter graduated from harvard business school and crossed the charles river to get a doctorate in harvards department of economics, he. He deconstructed production as a series of value creation links. A value chain is a set of activities that an organization carries out to create value for its customers. The value chain analysis sometimes refers to porters value chain analysis model is a wellknown business management tool developed by michael porter in 1985 in his alltime influential book competitive advantage. This perspective about how value is created forces managers to consider and see each activity not just as a cost, but as a step that has to add some increment of value to the finished product or service.
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