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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".
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 wrote in 1980 that strategy targets either cost leadership, differentiation, or focus. [1] These are known as Porter's three generic strategies and can be applied to any size or form of business. Porter claimed that a company must only choose one of the three or risk that the business would waste precious resources.
English: A diagram of Michael Porter's Value Chain based on an image from Porter M. E., Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), page 37. Date 27 April 2014, 20:47:05
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]
Porter's 1985 description of the value chain refers to the chain of activities (processes or collections of processes) that an organization performs in order to deliver a valuable product or service for the market. These include functions such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by ...
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.