A2.4 Organisational Value Chain


Organisational Value Chain – McKenzie/Porter definition



The value chain approach was developed by Michael Porter in his 1985 book “Competitive Advantage: Creating and Sustaining Superior Performance”. The concept of value added, in the form of the value chain, can be utilised to develop an organisation’s sustainable competitive advantage. All organisations consist of activities that link together to develop the value of the business, and together these activities form the organisation’s value chain. Such activities may include purchasing activities, manufacturing the products, distribution and marketing of the company’s products and activities. The aim of the value chain framework is to maximise value creation while minimising costs.

The first step in conducting the value chain analysis is to break down the key activities of the company according to the activities entailed in the framework. The next step is to assess the potential for adding value through the means of cost advantage or differentiation. Finally, it is imperative for the analyst to determine strategies that focus on those activities that would enable the company to attain sustainable competitive advantage.