Each company is a large collection of processes that aim to deliver value to their customers. One way to understand how these processes interact with each other and generate value is through the value chain, a diagram that shows how the company is organized to deliver value and generate competitive advantage. Follow the text and understand what the value chain is, what elements are part of it, what it is for and more.
What is the value chain?
The value chain is a tool for managing processes created by Michael Porter, in 1985. It reveals all the activities that the organization does to generate value for customers and indicates the links between them.
It is necessary to understand that each company has a value proposition, that is, the advantages that the company’s products and services have in relation to the competition, the problems that it aims to solve for its customers and how it differs from the others. This is the value perceived by the customer. You can learn more in this case.
One way to understand more precisely what the value chain is by analyzing the meaning of each word:
Chain: A series of linked links, like a chain.
Value: Customers’ perception of an organization’s products or services, especially with regard to cost-benefit.
Thus, we can understand that the value chain is a series of interconnected processes (links) that are necessary to enable a positive perception of customers regarding an organization’s products or services (value).
What is part of the value chain?
There are some basic elements designed by Porter for the value chain:
These are the processes that generate direct value for the company’s customers. They are also called core processes.
Inbound logistics: involves the purchase of raw materials or the contracting of services that will then be transformed into products;
Operations: activities that transform inputs into outputs (results generated at the end of the process), that is: producing, assembling, packaging, filling, etc.
Outbound logistics: this process involves activities related to the delivery of products or services to customers;
Marketing and sales: comprises activities that attract and lead customers to purchase products or services;
Services: also known as after-sales, this process is responsible for ensuring the relationship with customers after the sale and for maintaining and increasing the value of the products or services.
Support processes generate value indirectly, as they support the company’s primary processes.
Infrastructure: includes the management of the administrative, legal, financial and accounting areas.
Human Resources Management: involves activities such as recruiting and selecting new employees and articulating qualification, training and development programs.
Technological development: this process focuses on activities that support primary processes with technological interventions, such as process automation and the use of digital tools, for example.
Acquisition or purchases: processes that meet the resource needs that the company has to keep in operation, such as the acquisition of raw materials, search for suppliers and negotiation.