A2.4.3.3 The Value System


Porter extends the value chain concept to what he defines as a “Value System”.

This takes account of the fact that an individual firm’s value chain is inevitably “embedded” in a larger stream of activities. This suggests that there are at least three additional value chains of which account must be taken:

  1. Supplier Value Chains – which create and deliver the essential inputs to the firm’s own chain
  2. Channel Value Chains – which are the delivery mechanism(s) for the firm’s products on their way to the end buyer, customer or consumer
  3. Buyer’s Value Chains – which are the ultimate source of differentiation because it is the product’s role in this chain that determines buyer needs

It is therefore important that managers understand not only their own firm’s value chain, but also how it fits into the industry’s overall value system. The underlying point being that the value chains of separate firms in an industry will differ according to each organisation’s history, its strategies and its skills at implementation.