Michel Porter first introduced the value chain analysis framework in 1985 in his influential book, “Competitive Analysis”.
Using value chain analysis can be extremely useful and gives businesses a clear idea of how to adjust their activities in order to increase revenue and profit margins.
Using value chain analysis provides businesses with a clear idea of how to adjust their activities in order to increase revenue and profit margins. Learn more about the process of using value chain analysis plus its advantages and disadvantages.
In this blog post, our market research company will be discussing Porter’s value chain analysis, the process, advantages, and disadvantages, as well as what value chain analysis can be used for!
What is Porter’s Value Chain Analysis?
A value chain refers to all the activities that take place within a company before a product or service comes to market.
Thus, value chain analysis focuses on analyzing all areas of activities and identifying the areas that could be improved as well as understanding costs, competition, and activities that add the most value.
Overall, value chain analysis aims to identify weak points in infrastructure, marketing, operations, sales, and services (just to name a few).
These weak points can benefit from improvements, resulting in increased profitability and efficiency. Featured below is an example of Michel Porter’s value chain analysis model.
Image Source: Mind Tools
Porter’s value chain analysis consists of 5 primary activities:
- Inbound logistics
- Outbound logistics
- Marketing and Sales
As well as 4 support activities:
- Firm infrastructure
- Human resource management
- Technology development
What is the Value Chain Analysis Process?
Together, both the primary and support activities make up the value chain.
In order to begin the process of conducting a value chain analysis chart, it is necessary to identify each action that is important in the production of a product or service.
The next step is to identify the value and cost of each of the activities.
Finally, once the value chain analysis is complete, leaders of the company can then see an overview of the business and where improvements can be made.
Advantages and Disadvantages of Value Chain Analysis
With value chain analysis, you can break down products and services and the associated costs.
From this, you can find quick, efficient ways to cut down on costs, optimize resources, and increase profitability. Value chain analysis can be a great tool, resulting in optimized activities, leading to competitive advantages in the industry.
Although value chain analysis is useful, it can be an extremely time-consuming process.
While the value chain analysis process involves large amounts of data, finding this information can be labor and time-intensive. Additionally, it’s not always easy to find all the appropriate information necessary.
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We work with brands from across the country to execute various market research studies that deliver invaluable insights.
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