Value chain analysis
Value chain analysis examines activities from raw-material sourcing to after-sales service to identify where cost is incurred and where value is created for customers, guiding cost reduction, improvement and outsourcing decisions.
FrameworkPorter's value chain
See it move
Porter's value chain runs five primary activities in sequence: inbound logistics receives materials, operations converts them into product, outbound logistics delivers to customers, marketing and sales wins the order, and service supports it afterwards. Underneath, support activities such as purchasing and technology enable every stage rather than producing output. Mapping cost and value at each stage shows where to invest, cut, or outsource.
Check yourself
A clothing retailer's value chain analysis shows: (1) a merchandise photography studio costs €200,000 per year and directly drives 35% of online sales conversions; (2) a senior management fleet costs €60,000 per year and is used exclusively for internal travel. Which conclusion is best supported by the analysis?