Porter's Value Chain

Model
 • Porter's Value Chain Model is a
framework developed by Michael Porter
What is to analyze the internal processes that
create value in an organization.
Porter's • It helps businesses identify and
Value Chain understand their key activities, from
Model? sourcing raw materials to delivering
final products or services to customers.
 • Primary activities: These are the
core activities involved in the creation
Component and delivery of a product or service,
including inbound logistics,
s of the operations, outbound logistics,
Value marketing and sales.

Chain • Support activities: These activities

provide support to the primary
activities and include procurement,
technology development, human
resource management, and firm
infrastructure.
PRIMARY ACTIVITIES

• Inbound Logistics: The process of receiving, storing, and distributing inputs

to production. This includes transportation, warehousing, and inventory control.
• Operations: The transformation processes that turn inputs into outputs. This
includes machinery, labor, and technology.
• Outbound Logistics: The process of getting finished products to customers.
This includes warehousing, order fulfillment, and transportation.
• Marketing and Sales: The function of marketing, selling, and distributing
products. This includes advertising, sales promotions, and customer
relationship management.
• Service: This refers to the activities involved in providing customer
support, such as installation, maintenance, and repair.
SUPPORT ACTIVITIES:
• Procurement: Acquiring inputs such as raw materials, machinery, and
supplies. This includes sourcing, contracting, and monitoring suppliers.
• Technology Development: Improving the process of product design,
research, development, and innovation. This includes patents,
trademarks, and intellectual property rights.
• Human Resource Management: The process of recruiting, training,
and retaining employees. This includes performance management,
compensation, and benefits.
• Firm Infrastructure: The support services required to operate the entire
value chain. This includes accounting, finance, legal, and general
management.
VALUE CHAIN
MODEL
 • The value chain helps businesses
understand how each activity
contributes to the creation of value
for customers and how it impacts
Understandin the overall competitive advantage
g Value of the organization.

Creation • By analyzing the value chain,

businesses can identify
opportunities for cost reduction,
increased efficiency,
differentiation, and innovation.
 Manufacturing Industry:
• Inbound Logistics: Focus on efficient
supplier relationships and inventory
management.
Analyzing • Operations: Emphasize production
value chain efficiency and quality control.

activities in • Outbound Logistics: Optimize distribution

channels and order fulfillment.
different
• Marketing and Sales: Target specific
industries: customer segments and improve sales
techniques.
• Service: Enhance customer support and
extend product lifecycles.
 Healthcare Industry:
• Inbound Logistics: Streamline medical
supply procurement and ensure regulatory
compliance.
• Operations: Improve patient care
processes and health information systems.
• Outbound Logistics: Optimize pharmacy
and medication management, and
enhance patient discharge planning.
• Marketing and Sales: Promote
healthcare services effectively and provide
patient education.
• Service: Offer strong patient support,
follow-up, and quality care reporting.
 Ecommerce Industry

• Inbound Logistics: Optimize supply chain and

inventory management for efficiency.
• Operations: Enhance website user experience
and streamline order processing.
• Outbound Logistics: Optimize shipping and
delivery, and streamline returns and exchanges.
• Marketing and Sales: Personalize marketing
efforts and improve conversion rates.
• Service: Provide excellent customer support,
communication, and post-purchase
engagement.
Benefits and
Limitations:
Benefits of Porter's Value Chain Model:
1. Provides a structured understanding of a company's operations.

2. Identifies value-adding activities for targeted improvement.

3. Enables cost optimization and efficiency enhancement.

4. Supports the development of competitive advantages.

5. Guides strategic resource allocation.

6. Encourages cross-functional collaboration.

7. Emphasizes customer-centric value creation.

8. Facilitates adaptability and innovation.

Limitations of Porter's Value Chain
Model:
1.Potential oversimplification of complex processes.

2.Industry-specific focus may not apply universally.

3.Challenges in adapting to rapidly changing environments.

4.Limited emphasis on external factors and influences.

5.Resource-intensive for detailed analysis.

6.Assumes a linear progression of activities.

7.Doesn't fully capture intangible assets and activities.

8.May overemphasize cost-cutting over value creation strategies.

CASE
STUDIES
Primary Activities:
• Inbound Logistics: Coca-Cola has a robust global
supply chain network to ensure a steady supply of
raw materials. They work closely with suppliers to
maintain quality standards.
• Operations: The company maintains high-quality
production standards across its bottling plants
worldwide, ensuring consistency in taste and
quality.
• Outbound Logistics: Coca-Cola's distribution
network is extensive, allowing their products to be
widely available in various markets.
Support Activities:

• Marketing and Sales: Coca-Cola is a master of brand

marketing. Their campaigns emphasize universal themes
like happiness and refreshment, creating a strong
emotional connection with consumers.
• Technology Development: The company invests in
advanced bottling and packaging technology to improve
efficiency and reduce environmental impact.
RESULT:

Coca-Cola's strong brand, efficient production

and distribution systems, and continuous
innovation in marketing and technology have
solidified its position as one of the world's
leading beverage companies. Their global
reach and brand recognition are key elements
of their competitive advantage.
TITAN COMPANY LTD.
Primary Activities:
Inbound Logistics:
• Strong supplier relationships for materials like gold and
metals.
• Efficient inventory management for cost-effective supply.
Operations:
• Focus on high-quality, efficient manufacturing processes.
• Emphasis on quality control and craftsmanship.
Outbound Logistics:
• Well-developed distribution network across India.
• Strong relationships with retailers for product availability.
Support Activities:

Technology Development
• Investment in R&D for innovative designs and
technologies.
• Utilization of advanced manufacturing technology
for precision.

Human Resource Management:

• Extensive employee training and skill
development.
• Emphasis on employee well-being and
engagement.
RESULT:
Through careful optimization of each value
chain activity, Titan has achieved operational
excellence, quality assurance, and innovative
product development. Overall, this case study
highlights how Titan's strategic use of the Value
Chain Model has been pivotal in their industry
dominance.
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