Fred R. David Prentice Hall Porter Supply Chain Model The Value Chain framework of Michael Porter is a model that helps to analyze specific activities.

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Presentation transcript:

Fred R. David Prentice Hall Porter Supply Chain Model The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.

Fred R. David Prentice Hall The activities of the Value Chain Primary activities (line functions) Support activities (Staff functions, overhead)

Fred R. David Prentice Hall Primary activities (line functions) Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Fred R. David Prentice Hall Support activities (Staff functions, overhead) Firm Infrastructure Technology Development Human Resource Management Procurement

Fred R. David Prentice Hall Creating a cost advantage based on the value chain A firm may create a cost advantage: By reducing the cost of individual value chain activities, or By reconfiguring the value chain.

Fred R. David Prentice Hall 10 cost drivers related to value chain activities Economies of scale. Learning. Capacity utilization. Linkages among activities. Interrelationships among business units. Degree of vertical integration. Timing of market entry. Firm's policy of cost or differentiation. Geographic location. Institutional factors (regulation, union activity, taxes, etc.).