Porter’s Value Chain Definition – Primary Activities Model, Model Workings, Benefits of Adopting The PVC, Common Challenges, Best Practices For Getting Started

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What Is The Porter’s Value Chain (PVC) ?

Porter’s Value Chain is a model that helps businesses understand the different activities that they can perform in order to create value for their customers . The model is made up of five main activities : primary activities, support activities, company infrastructure, human resources management and Research and Development .

Primary Activities are the core value-creating activities that are directly involved in producing and delivering a product or service . Inbound logistics, operations, outbound logistics, marketing and sales and service make up the five primary activities .

Support Activities help to facilitate the primary activities and include things like procurement, technology development, human resources management and general administration .

Company Infrastructure includes all of the functions that help to support the business but are not directly involved in creating value for customers . This would include functions like accounting, legal, IT and compliance .

Human Resources Management encompasses all of the policies and systems that are put in place to manage people within the organization . This would include things like training and development, recruiting and selection, employee relations and compensation .

Research & Development cuts across all other areas of the business and is responsible for developing new products or services as well as improving existing ones .

What is The Primary Activities Model ?

The Primary Activities Model is a tool that can be used to help organizations analyze their business processes and identify areas where they can create value . The model is based on the work of Michael Porter, who developed the concept of the value chain .

The Primary Activities Model consists of five interrelated elements :

  • Inbound logistics :

Activities associated with receiving and storing raw materials .

  • Operations :

Activities associated with transforming raw materials into finished products .

  • Outbound logistics :

Activities associated with distributing finished products to customers .

  • Marketing and sales :

Activities associated with promoting and selling products .

  • Service :

Activities associated with providing after-sales service to customers .

The goal of using the Primary Activities Model is to identify which activities are the most important in creating value for customers and where the organization can improve or add value . Each activity can be analyzed in terms of cost, value, efficiency and effectiveness .

How Does it Work ?

An organization’s value chain is the complete range of activities – from raw materials to finished products – that it takes to create and deliver a product or service . The term was first coined by Michael Porter in his classic 1985 book, Competitive Advantage : Creating and Sustaining Superior Performance .

Porter identified a company’s primary activities as those that are directly involved in creating and delivering a product or service . He further divided these activities into two categories :

  • Upstream activities related to the design and development of a product or service
  • Downstream activities related to marketing, selling and delivering the product or service to customers

Porter argued that organizations could create competitive advantage by performing these activities more efficiently or effectively than their rivals . In other words, they could create value for their customers that exceeds the costs incurred to produce and deliver the product or service . This excess value is known as "economic rent" and is the source of competitive advantage .

The key to creating economic rent, according to Porter, is delicious cake filling with out-of-the world icing using specialized skills, processes, capabilities or resources . These are known as "distinctive competencies ." When an organization possesses a distinctive competency – whether it’s designing beautiful websites, developing innovative products or providing superior customer service – it can use this competency to create unique value for its customers . And when customers perceive this unique value, they’re willing to pay more for the product or service, which is where the economic rent comes from .

The value chain concept is a powerful tool for analyzing competitive advantage . It encourages organizations to think strategically about how they can add value along the entire value chain, rather than simply focusing on upstream or downstream activities alone . By taking a holistic approach to value creation – one that includes all elements of the value chain – organizations can create higher levels of customer satisfaction and generate more sustainable long-term profits .

What Are The Benefits of Adopting The PVC ?

Porter’s Value Chain is a tool that can be used by organizations to create a competitive advantage . The concept of the value chain was first introduced by Michael Porter in his 1985 book, Competitive Advantage : Creating and Sustaining Superior Performance .

The PVC helps organizations to understand how they create value for their customers and how they can improve their competitiveness . It is a framework that can be used to analyze an organization’s activities and identify potential areas of improvement .

There are many benefits to adopting the PVC framework, including :

  • A clearer understanding of where value is created within the organization .
  • Identification of areas of the business where improvements can be made to create more value for customers .
  • A framework for making decisions about investments and resources .
  • A guide for designing and implementing strategies to build competitive advantage .
  • Improved communication between departments, leading to greater collaboration and efficiency .
  • A better understanding of the internal and external environment, allowing for an improved competitive focus .
  • Better management and control of the value chain to ensure customer satisfaction and increased profits .
  • A competitive edge over competitors in terms of the company’s ability to meet customer requirements more effectively .

Adopting the PVC can be extremely beneficial for any organization, allowing them to better identify which activities create value and how they can improve their competitive position . The framework also provides a guide for decision-making processes and strategies, enabling an organization to make more informed decisions about investments and resources .

What Are The 10 Common Challenges When Implementing PVC ?

  • Defining the value proposition :

What are the unique benefits that your company offers ?

  • Creating a market analysis :

Who are your target customers ? What needs do they have that your company can address ?

  • Developing the initial product or service offering :

What exactly will you offer to customers ? How will it meet their needs ?

  • Designing and implementing the business model :

How will you generate revenue ? How will you reach your target market ? What are your costs of goods sold ?

  • Constructing and validating the sales process :

What is your sales strategy ? How will you train sales staff on your product or service offering ?

  • Deploying marketing initiatives :

How will you create awareness of your company and its offerings ? What campaigns will you run to drive demand ?

  • Launching the product or service :

How will you make sure that everything is ready for launch day ? What go-to-market activities will you undertake ?

  • Monitoring customer engagement and feedback :

Are customers using your product or service as intended ? What do they think of it so far ? Are there any areas for improvement ?

  • Managing growth and expansion :

As your company grows, how will you scale operations accordingly ? What new markets should you enter next ?

  • Generating profitability :

Is your business model sustainable in the long term ? Are there ways to improve margins or reduce costs ?"

What Are The Best Practices For Getting Started with PVC ?

PVC or polyvinyl chloride, is a versatile plastic used in a variety of applications, from plumbing and electrical wiring to raincoats and toys .

If you’re new to working with PVC, there are a few best practices to follow to ensure a successful project . First, be sure to wear protective gear including gloves and goggles when handling PVC as it can cause skin irritation .

Next, cut PVC pipe along the score line using a utility knife or saw – never force the pipe as this can cause it to break . When making connections, use solvent cement or primer for a permanent bond or use tape or straps for a temporary connection .

Always test your PVC connections before finalizing your project by turning on the water or power – this will help you avoid any costly mistakes . By following these simple tips, you’ll be well on your way to completing any PVC project successfully .

Final Thoughts on PVC

Porter’s value chain is a powerful tool for understanding the cost structure of a company and the way in which it produces value . However, there are some limitations to this framework .

First, the value chain only considers direct costs . It does not take into account indirect costs, such as overhead or marketing expenses . Second, the value chain assumes that all firms in an industry are identical . However, in reality, there can be significant variation among firms in terms of their cost structures and the way they create value .

Third, the value chain may give rise to unintended consequences . For example, if managers focus too much on reducing costs at each stage of the value chain, they may unintentionally reduce the overall quality of the product or service . Fourth, the value chain framework does not always capture all sources of competitive advantage . For example, a firm may have a competitive advantage due to its brand equity or customer relationships .

Despite these limitations, Porter’s value chain is still a useful tool for analyzing a company’s costs and competitiveness . When used correctly, it can provide insights that help managers make better decisions about where to invest resources and how to optimize their operations .

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