Value Chain

What is a Value Chain?

A Value Chain orchestrates a dynamic sequence of actions strategically designed to enhance core value for both customers and the business. Coined by Michael Porter in 1985, this concept categorizes activities into two fundamental types: “primary” activities and “supporting” activities.


Key Components:

  1. Primary Activities:
    • Physical Creation: Actively involves the tangible production or creation of the product or service.
    • Marketing and Transfer: Encompasses activities focused on promoting the product or service and facilitating its seamless transfer to the buyer.
    • After-Sale Support: Includes post-purchase support, ensuring customer satisfaction and addressing concerns in the post-sales phase, thereby enhancing value.
  2. Supporting Activities:
    • Enterprise-wide Business Processes: The Value Chain extends beyond individual activities to embrace enterprise-wide business processes. These processes collectively contribute to value creation and intricately link to specific performance objectives.

Enterprise-wide Business Process Value Chain

The Enterprise-wide Business Process Value Chain offers a nuanced perspective on the sequence of activities (processes) meticulously designed to deliver value to the customer. This approach recognizes that value creation is not confined to siloed departments but spans the entirety of the organization.

Characteristics:

  1. End-to-End View:
    • This offers a holistic, end-to-end view of value creation, providing a comprehensive understanding of how diverse processes contribute to the final product or service.
  2. Cross-Functional Collaboration:
    • Primary processes exhibit remarkable versatility, traversing functional boundaries within organizations, departments, or even extending between distinct enterprises. This promotes collaboration and integration, fostering a more synergistic approach.
  3. Performance Objectives:
    • Every activity within the value chain has specific performance objectives intricately linked to its parent business process. This ensures that each component efficiently contributes to the overarching goal of value creation.

Significance of Primary Activities

Primary activities constitute the heartbeat of the value chain as they actively engage in the physical creation, marketing, and support of the product or service. Referred to as value-adding, these activities directly influence customer satisfaction and are pivotal to the sustained success of the business.

In essence, It’s a strategic roadmap that underscores the significance of both primary and supporting activities in the perpetual journey of value creation. The Enterprise-wide Business Process Value Chain expands this paradigm, advocating for cross-functional collaboration and providing an encompassing view of value delivery across diverse organizational landscapes.

Further Resources on Value Chain:


Explore more about different process improvement terms in our BPM Glossary.

Louie A

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Louie A

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