What is the value chain?

The concept of value chain was introduced by Porter, when he divided the different activities of the company, in order to determine how to offer the highest possible value to the customer. It is, therefore, a strategic analysis tool. Its function is to determine what are the competitive advantages of a certain business or company compared to its competitors. In this way, each one of the functions or departments of the company is analyzed, in comparison with that offered by the counterparts of the competition.

The value chain can refer both to a product, to a service and to the company itself. Michael Porter understands that each of the company's activities are like links in a chain. Being the characteristic of the value chain, that in each of these links value is added to the product or service.

For Porter, the activities that make up the value chain are divided into primary and support. Among the former are activities related to materials and storage or transformation. In short, activities that are directly related to production, although understood in a broad sense, including everything related to marketing and sales.

Among the support activities, the provisioning, and, above all, horizontal activities are included. How are they, administration, accounting, finance, human resources, development, etc. This type of activity is more related to the administration and sustainability of the company in the long term, and, not so much, with the value of the products or services offered by the company at that specific moment.

Another important question is: what is meant by value? To which the answer is usually that it is the amount that a customer is willing to pay for a product or service. However, the concept has evolved, in the sense that each time, not only the amount of money that the client is willing to pay is taken into account, but also the amount of time they are willing to have relationships with the company. business.


Leave a Comment