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Value chain is the linked set of value-creating activities all the way from basic raw material sources for component suppliers through to the ultimate end-use product or service delivered to the customer.
Proter’s described the value chain as the internal processes or activities a company performs “to design, produce, market, deliver and support its product”. He further stated that “a firm’s value chain and the way it performs individual activities are a reflection of its history, its strategy, its approach of implementing its strategy, and the underlying economics of the activities themselves”. The business activities are classified in to primary activities and support activities.
Primary activities are those activities which are involved in transforming the inputs in to outputs, delivery and after sales service. Support activities are intended to support theprimary activities like for example procurement, human resources management, etc.
Three useful strategic frameworks for value chain analysis are:
• Industry structure analysis;• Core competencies; and
• Segmentation analysis.
