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 value chain activities include:
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
From the Reference Library
Designed to support all Year 12 students in the first year of taking A Level Business, our Flying Start Student Workshops focus on the core Year 1 teaching content and assessment skills.
Our Edexcel A Level Business Grade Booster workshops are designed to provide essential revision support to Edexcel Business students as they complete their preparation for the three terminal papers at...
tutor2u, Various - online and face-to-face events
Merchant Taylors' School, Northwood, Middlesex
Teacher of Economics and Business Studies, 6 days left to apply
Downside School, Stratton-On-The-Fosse, near Bath
- Browse all jobs ›
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.