Value chain analysis
Definition
A strategic analysis framework developed by Michael Porter that maps the full set of activities an organization performs to create and deliver a product or service — identifying which activities generate competitive advantage and where margin is created or lost.
Value chain analysis, introduced in Porter's Competitive Advantage (1985), breaks a company's operations into a linked chain of activities. The premise: competitive advantage doesn't come from a company as a whole, but from the specific activities within it where the company performs better or differently than competitors.
The value chain structure:
Primary activities (directly create the product or service):
- Inbound logistics: receiving and storing inputs.
- Operations: transforming inputs into the product.
- Outbound logistics: delivering the finished product.
- Marketing and sales: making buyers aware and enabling purchase.
- Service: post-sale support and maintenance.
Support activities (enable the primary activities):
- Firm infrastructure: finance, legal, management.
- Human resource management: recruiting, training, retention.
- Technology development: R&D, product development, IT.
- Procurement: purchasing inputs.
How to use it: Map each activity, estimate its cost and contribution to customer value, and compare against competitors. Where your cost is lower or your differentiation is higher, you have a competitive advantage. Where you're weaker, you have a vulnerability.
On a whiteboard: Value chains are drawn as horizontal sequences with support activities stacked above. Arrows and annotations highlight where value is concentrated. Snap the completed chain with BoardSnap to capture the competitive diagnosis before the strategy session ends.
Examples
- Amazon's value chain analysis reveals that its competitive advantage lies in inbound logistics and technology development — not retail operations per se.
- A product team uses value chain analysis to identify that customer success (a support activity) is actually their primary source of retention — and should be resourced as a primary activity.
- A consultant maps a client's value chain against a competitor's in a strategy session, identifying three activities where the client has cost advantage.
- A startup founder draws a value chain on a whiteboard to explain to the board where the company's differentiation actually lives — not in the product feature list, but in the onboarding and support process.
Snap a value chain analysis. Ship its actions.
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