## Value Chain Analysis
### Concept (Michael Porter)
The value chain divides an organization's activities into two strategically important groups:
1. Primary Activities — directly involved in creating and delivering value
2. Support Activities — enable and improve the primary activities
Value chain analysis provides an excellent tool to examine the origin of competitive advantage.
> Applicable to businesses of all sizes — from sole proprietorships to multinational corporations.
### Primary Activities
| Activity | Description |
|---|---|
| Inbound Logistics | Receiving, storing, and distributing inputs to the product/service |
| Operations | Transforming inputs into finished product (machining, packaging, assembly, testing) |
| Outbound Logistics | Collecting, storing, and distributing the product to customers |
| Marketing & Sales | Making consumers aware of the product and enabling purchase (advertising, selling, sales administration) |
| Service | Post-sale activities that enhance or maintain product value (installation, repair, training, spares) |
### Support Activities
| Activity | Description |
|---|---|
| Procurement | Processes for acquiring resource inputs to the primary activities |
| Technology Development | Know-how and technology for products, processes, or resources (even simple know-how qualifies) |
| Human Resource Management | Recruiting, managing, training, developing, and rewarding people |
| Infrastructure | Planning, finance, quality control, information management systems — critical to organizational performance |
### Key Insight
> It is the competencies to perform particular activities and the ability to manage linkages between activities that are the source of competitive advantage.
Understanding strategic capability must begin with identifying these separate value activities.