ValueChain

Value chain is a business concept describing the full range of activities required to bring a product or service from idea to customer and beyond, with each step potentially adding value. The model helps managers understand where value is created, where costs are incurred, and how activities relate to competitive advantage.

Origin and structure: The term was popularized by Michael E. Porter in 1985. The classic model splits activities into primary activities—inbound logistics, operations, outbound logistics, marketing and sales, and service—and support activities—firm infrastructure, human resource management, technology development, and procurement. Some variations emphasize linkages with suppliers, distributors, and customers, and note that value creation often occurs through integration across activities and partners.

Applications: Value chain analysis assesses the cost and value contribution of each activity to identify improvement opportunities, outsourcing or insourcing decisions, and ways to differentiate products or services. It can be applied at the product, process, or business-unit level and is often used alongside supply chain management to optimize efficiency, quality, and responsiveness.

Modern extensions: Digital value chains and value networks reflect increased interfirm collaboration, data flows, and platform ecosystems. Some perspectives emphasize co-creation with customers and partners, and the idea that value may be distributed across a network rather than added in a linear sequence. In practice, managers adapt the framework to fit industry context and organizational boundaries.

See also: supply chain management, value proposition, business process management.