Study notes

Value Chain Analysis

  • Levels: A Level
  • Exam boards: AQA, Edexcel, OCR, IB, Other, Pre-U

Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business.

Work by Michael Porter suggested that the activities of a business could be grouped under two headings:

(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and

(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").

Linking Value Chain Analysis to Competitive Advantage

What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.

Primary Activities

Primary value chain activities include:

Secondary Activities

Secondary value chain activities include:

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps:

(1) Break down a market/organisation into its key activities under each of the major headings in the model;

(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;

(3) Determine strategies built around focusing on activities where competitive advantage can be sustained

Job board

Teacher of Business and Economics 9 days left to apply

King Edward VII School, Sheffield

New

Join the tutor2u community

With a tutor2u account you can access extra features to support your teaching & learning.

Subscribe to the daily digest

Curate your own content

Track your training schedule

Manage your resource library

Receive job alerts

Join the community

Already joined? Sign in now ›

You Might Also Like

More From the Digital Store

This activity can be used to consolidate students understanding of fixed costs, variable costs, profit and loss. The activity is delivered via the context of a business choosing a location....

£5.00 (+VAT)

Location Calculation

The entire delegate resource pack from WOW! Business 2015.

£75.00 (+VAT)

WOW! Business 2015 Course Resource Pack

Topic-by-topic detailed study notes for Theme 1 and Theme 2 of the Edexcel A Level Business specification.

£100.00 (+VAT)

Edexcel A Level Business Year 1 (AS) Course Companion

Recruitment

Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u