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The value chain model / Michael Porter Value Chain model framework

Competitive advantage is the key to survival or rather key to lead. We derive competitive advantage by drafting value for the organization. This is done by understanding the value chain of your firm. Michael Porter identified a set of interrelated generic activities common to a wide range of firms. The resulting model is known as the value chain and is depicted below:

Primary Value Chain Activities

Primary Value Chain Activities

Inbound
Logistics

> 

Operations

> 

Outbound
Logistics

> 

Marketing
& Sales

> 

Service

 

 

The goal of these activities is to understand the cost implications for providing a service or product. It helps understanding where things can me crafted and can help reduce cost and generate profit margin.

Inbound Logistics

The inbound logistics includes receiving raw materials, warehousing, and inventory control of materials that are used to for the end product ( resultant product ).

Operations 

Operations are the value-creating activities that transform the inputs into the final product.
Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc.

Marketing Activities: 

Activities that are done to influence purchase decisions in consumers and customers.
Sales Activities: The pitching and other activities that eventually help marketing to convert there initiatives into sales. ( The sales is the touch point for the products that you produce so some may argues that Sales is more important than marketing function … well it’s a debate !! )

Service Activities:

Selling of products is not enough its more important to have a good service initiative in the organization that supports the consumer and works in having faith in your product and eventually your brand.Any or all of these primary activities may be vital in developing a competitive advantage. For example, logistics activities are critical for a provider of distribution services, and service activities may be the key focus for a firm offering on-site maintenance contracts for office equipment.

These five categories are generic and portrayed here in a general manner. Each generic activity includes specific activities that vary by industry.


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