What is Value Chain Analysis and the primary activities in Value Chain Analysis

Answer:
Various competences and resources of an organization can be integrated into a chain of activities which an organization performs to meet customer demand and these activities are expected to create value when it is performed. The chain is thus called a value chain. Michael Porter (1985) introduced the concept of value chain analysis.

How Value Chain Analysis helps a business?

Value chain analysis helps in understanding how value is created in organizations through various activities. These activities can be divided into two broad categories: primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service or customer value. Support activities, as the name indicates, support the primary activities or more, correctly, help to improve the ‘effectiveness or efficiency of primary activities.

What are the the primary activities in Value Chain Analysis?

Primary activities can be divided into five major areas: 

• inbound logistics, 
• operations,
• outbound logistics, 
• marketing and
• sales and service. 

Support activities in Value Chain Analysis:

Support activities can be divided into four categories: 

• procurement, 
• technology development, 
• human resource management and 
• organizational infrastructure.

Organizations can effectively use value chain analysis to identify the weak links (and also the strong links) in the chain for further analysis, review and necessary action. 

In using the value chain, an organization should concentrate on two aspects - First, it should ascertain how different activities, primary and support, are being performed so that contribution of each activity to organizational objectives or goals can be measured; 

Second, the coordination or integration of various activities into a cohesive value chain.