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Value chain
The products and service an organisation produces can gain value through specific activities if they are run efficiently at optimum level and done effectively.
Originator: Michael E. Porter
Michael Porter suggested that through specific activities, the products and service an organisation produces can gain value. In order to gain a real competitive advantage these activities need to be run efficiently at optimum level and, done effectively, the increased value should outweigh the running costs. The activities are split into two categories:
Primary activities
Inbound logistics – receiving, storing, inventory and transportation of goodsOperations – all processes involved with transforming the inputs into the final product
Outbound Logistics – collection, storage and distribution of products
Marketing and Sales – any activities involved with informing buyers of the available products and facilitating their purchase
Service – any support service offered after sale of product maintaining its value
Secondary activities
Procurement – the acquisition of raw materials or resources at the best price and qualityTechnology Development – any technology used to support the primary activities such as research and development
Human Resource Management – personnel related activities such as recruiting and training
Firm Infrastructure – departments involved in serving the companies needs such as legal, finance, general management etc.
Example of a value chain
