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A value chain is a progression of activities that a business or firm performs in order to deliver goods and services of value to an end customer.The concept comes from the field of business management and was first described by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.
Porter introduced the concept of value chain analysis in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance. The value chain comprises each of the activities, from design through distribution, that a company performs to produce a product; these activities are viewed as the “basic units of competitive advantage".
[10] [12] [13] Critical analysis done separately for cost leadership strategy and differentiation strategy identifies elementary value in both strategies in creating and sustaining a competitive advantage. Consistent and superior performance over competition could be reached with stronger foundations in the event “hybrid strategy” is adopted.
He introduced the concept of interoperability across the value chain as a major issue within firms (Porter 1985). W. Edwards Deming also contributed with the “Deming Flow Diagram” depicting the connections across the firm from the customer to the supplier as a process that could be measured and improved like any other process (Walton 1986).
Porter revised the strategy paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations as part of their value chain is the foundation of competitive advantage, thereby outlining a process view of strategy. [34]
In business, a competitive advantage is an attribute that allows an organization to outperform its competitors.. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology and to proprietary information.
Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. However, for most consultants, the framework is only a starting point and value chain analysis or another type of analysis may be used in conjunction with this model. [13]
Value chain representation. The term value chain was first popularized in a book published in 1985 by Michael Porter, [1] who used it to illustrate how companies could achieve what he called “competitive advantage” by adding value within their organization.