Porter's Value Chain

Introduction

• Presentation from Marketing91.com
• Topic: Porter's Value Chain
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What is Porter's Value Chain?

• A value chain is a series of activities a business performs to produce valuable goods or services.
• Introduced by Michael Porter in his book "Competitive Advantage" (1985).
• It comprises activities that create value for customers, leading to competitive advantage and profits.

Diagram of Porter's Value Chain

• Main Activities:
  • Primary Activities:
    • Inbound Logistics
    • Operations
    • Outbound Logistics
    • Marketing and Sales
    • Service
  • Support Activities:
    • Firm Infrastructure
    • Human Resource Management
    • Technology Development
    • Procurement
• Together, these activities contribute to higher margins.

Primary Activities

1. Inbound Logistics

• Involves organizing the inbound movement of materials and inventory from suppliers.
• Example:
  • Tire manufacturers sourcing materials from Thailand.
  • Starbucks partnering with 300,000 farmers for coffee.

2. Operations

• Management of processes that turn inputs (energy, labor, raw materials) into outputs (goods/services).
• Example:
  • Tesla manufacturing electric cars.
  • Apple assembling iPhones in India and China.

3. Outbound Logistics

• Storing and moving final products to end users.
• Example:
  • Amazon's delivery services and future drone delivery (Amazon Prime Air).

4. Marketing and Sales

• Processes involved in selling products and creating value offerings.
• Example:
  • Burger King's marketing against McDonald's.
  • GoPro's user-generated content approach.
  • Red Bull promoting extreme sports.

5. Service

• Post-sale processes to maintain product functionality.
• Example:
  • Tesla's showrooms for a seamless customer experience.

Support Activities

• Support primary activities to enhance efficiency.

1. Firm Infrastructure

• Includes quality assurance, public relations, finance, legal, accounting, and management.

2. Technology Development

• Encompasses technical knowledge, software, hardware, equipment.
• Examples:
  • Tesla developing batteries in-house.
  • Amazon Go's cashier-less stores.

3. Human Resource Management

• Activities related to hiring, training, compensating, and managing staff.
• Example:
  • Ritz-Carlton empowering staff.
  • Apple providing perks to employees.

4. Procurement

• Acquiring goods and services from external sources.
• Examples:
  • McDonald's sourcing from McLean.
  • Tesla procuring batteries from Panasonic.
  • Facebook acquiring Jiffy for Instagram.

Conclusion

• Support activities enhance the entire value chain.
• End of topic discussion on Porter's value chain.
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