The value chain of Porter

The value chain of Porter

The value chain of Porter is a management tool developed by professor and researcher Michael Porter, which allows an internal analysis of a company, through its breakdown into its main value generating activities.
It is called value chain because it considers the main activities of a company like links in a chain of activities that will add value to the product as it passes through each of them.
According to this tool, the disaggregate a company in these activities allows better identify their strengths and weaknesses, especially with regard to potential sources of competitive advantage , and costs associated with each activity.
According to this tool also All companies have a value chain comprised of these activities ranging from product design and obtaining inputs to product distribution and after sales services.
This tool classifies generating activities value of a company into two: the primary activities or line and support activities or support:
Primary Activities or line

These are activities that are directly related to the production and marketing of the product:

    Logistics interior (input) : related to the receipt, storage and distribution of inputs required to manufacture the product activities.
    Operations : related to the transformation of inputs into the final product activities.
    Outdoor Logistics (output) : activities related to the storage of the finished product, and distributing it to the consumer.
    Marketing and sales : the act related to publicize, promote and sell the product activities.
    Services : related to the provision of complementary services such as product installation, repair and maintenance of the activities.

Support activities or support
They are those activities that add value to the product but are not directly related to the production and marketing of it, but rather they support the primary activities:

    Infrastructure Company : activities that support the entire company, such as planning, finance and accounting.
    Human resources management : related to recruiting, hiring, training and staff development activities.
    Technology development : research related to the development of the technology needed to support other activities.
    Provisioning : related to the procurement process activities.

The analysis of a value chain involves assigning a value to each of these activities, as well as an associated cost (both in terms of money and time), and then look at these values ??and costs strengths and weaknesses that may mean a competitive advantage or disadvantage.
In short, the value chain allows us to better identify strengths and weaknesses in a company (especially when compared to the value chains of competing companies), better detect potential sources of competitive advantage, and better understand the behavior of costs.
And ultimately, enhance or leverage these strengths, especially when converted into competitive advantage, and reduce or overcome these weaknesses, especially to minimize costs; Looking to generate the largest possible margin, defined as the difference between value and cost of each activity.