Porter’s Value Chain

• Introduced in Michael Porter’s book “Competitive Advantage” in 1985

• Value Chain: Set of activities that an organization carries out to create value for its
customers
• General Purpose Value Chain, to examine activities and see their connection
• Focus: Systems not departments
Primary Activities: Relate directly to physical
creation, sale, maintenance, and support of
product/service

Building Blocks
Secondary Activities: These activities support
the Primary function, each plays role for
other

Profit Margin= Value Created and Captured – Cost of Creating the Value
Model Steps

Step 1: Identify sub activities for

primary

Step 2: Identify sub activities for

secondary

Step 3: Identify Links

Step 4: Look for opportunities

 HP Value Chain
E
Direct
Distribution N
D
Customer
Services and Marketing Service C
R&D
Assembly and Sales
+ U
Sales Support S
T
O
Indirect M
Distribution
E
R