What is the value chain: basic concept

The value chain consists of a theoretical concept whose function is to describe how to develop the activities and functions of the company, and that determines the same thing in different aspects of it and create value for the end customer.

value chain

It can be found in different stages found in an economic process; you can try the raw material to the distribution of the product, adding value at each stage.

To optimize the production process is looking for a good analysis of the value chain that determines the proper functioning of the company based on the efficient use of resources and reducing costs efficiently, so that you can extend the margin of the company while gaining a competitive edge in the market.

It is a great tool for the analysis of the company’s strategic planning in order to create value by cutting costs within limits. The value activities that performed by firms or business unit are called business strategy or competitive strategy.

It can influence the actions or activities of the company, the picture segment, industrial sectors with which the company competes and geographical landscape. It is, among other things, a reflection of the strategy, approach and other aspects that differentiate the company and make it somehow unique.

The primary activities relate to the production and distribution of products and services of the company, such as operations, inbound logistics, outbound logistics, service, sales and marketing. Support activities are based on human resources, infrastructure, technology and company acquisitions.

Within these activities we can drill down further actions:

  • Operations, processing of raw materials to turn them into the final result.
  • Internal logistics. Actions receiving, storage and distribution and raw materials.
  • External logistics. Storage and distribution of products and processed.
  • Service maintenance and after sales.
  • Marketing and sales, to raise awareness of the product.
  • Supply, purchase of materials.
  • Infrastructure. The actions that support the business, such as finance, accounting and planning.
  • Management and human resource management. Recruitment, search and motivation in the company.
  • Technological development, research and development. Improvement and technology management, procurement of new technologies.

The model of the value chain will take precedence over the activities of the business in which competitive strategies to improve. That is why the company can differentiate themselves and gain competitive advantage of the other companies in the sector.

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