Value Chain Analysis

Value Chain Analysis is a tool used to identify and analyze the activities that a company performs to create value for its customers. It provides a way to break down a company's operations into its component parts and understand how each part contributes to the company's overall performance.

At a very high level, the Value Chain Analysis is used in the context of business, strategy.

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What is the Value Chain Analysis?

A visual explanation is shown in the image above. The Value Chain Analysis can be described as a matrix with the following quadrants:

  1. Primary Activities: Primary activities are activities that directly create value for customers, such as inbound logistics, operations, outbound logistics, marketing and sales, and service. Example: Inbound logistics - receiving, storing, and distributing inputs.
  2. Support Activities: Support activities are activities that help to support the primary activities, such as procurement, technology development, human resources management, and firm infrastructure. Example: Procurement - purchasing inputs from suppliers.
  3. Cost Drivers: Cost drivers are activities that increase the cost of producing a product or service. Examples: Labor costs, capital costs, and overhead costs.
  4. Value Drivers: Value drivers are activities that increase the value of a product or service. Examples: Customer service, product quality, and brand recognition.

What is the purpose of the Value Chain Analysis?

Value Chain Analysis is a tool used to identify and analyze the activities that a company performs to create value for its customers. It provides a way to break down a company's operations into its component parts and understand how each part contributes to the company's overall performance. The analysis can be used to identify areas of strength and weakness, and to develop strategies for improving a company's competitive position.

The Value Chain Analysis matrix is divided into four quadrants. The top-left quadrant is labeled “Primary Activities” and includes activities such as inbound logistics, operations, outbound logistics, marketing and sales, and service. The top-right quadrant is labeled “Support Activities” and includes activities such as procurement, technology development, human resources management, and firm infrastructure. The bottom-left quadrant is labeled “Cost Drivers” and includes activities such as labor costs, capital costs, and overhead costs. The bottom-right quadrant is labeled “Value Drivers” and includes activities such as customer service, product quality, and brand recognition.

The Value Chain Analysis matrix can be used to identify areas of strength and weakness, and to develop strategies for improving a company's competitive position. For example, a company may identify that its operations are inefficient and are costing it more than its competitors. The company can then use the Value Chain Analysis matrix to identify areas where it can improve its operations and reduce costs.


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What templates are related to Value Chain Analysis?

The following templates can also be categorized as business, strategy and are therefore related to Value Chain Analysis: Effort Impact Matrix, Gap Analysis Matrix, Growth Share Matrix, Kraljic Matrix, Outsourcing Matrix, Quadrant Analysis, Risk Analysis Matrix, Risk Value Matrix. You can browse them using the menu above.

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