Your value chain is the backbone of your operations. It’s where value is created, delivered, and, if not carefully managed, where it can be lost. By fully understanding the true definition of the value chain and how each activity contributes to your business goals, you can identify opportunities to streamline processes, improve customer outcomes, and gain a lasting competitive edge.
Understanding the basics
The term value chain refers to the full range of activities that a company performs to deliver a product or service to the market. These activities collectively add value to the offering, hence the name. It’s a strategic framework that helps businesses analyze each step involved in creating and delivering value to their customers.
Value chain vs. supply chain
It’s common to confuse the value chain with the supply chain, but they are not the same. The supply chain primarily focuses on the flow of goods, services, and information from suppliers to customers. It’s about logistics, procurement, and physical distribution.
The definition of the value chain, on the other hand, is broader. It encompasses not only logistics and procurement but also internal operations, marketing, service, and more. The value chain looks at how each activity contributes to creating value, not just moving products.
Where the concept comes from
The value chain was introduced by Michael Porter in his 1985 book Competitive Advantage. His framework broke down business activities into primary and support functions. The goal? To identify where value is created and where it can be improved.
The two types of activites in a value chain
Primary activities directly create value
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Inbound logistics: Receiving and managing raw materials
Operations: Converting materials into products or services
Outbound logistics: Delivering the product or service
Marketing and sales: Reaching and converting customers
Service: Supporting the customer after purchase
Seconday activities enable the primary to function effectively
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Firm infrastructure: Finance, legal, quality management
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Human resources: Recruiting and training talent
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Technology development: Innovation, software, automation
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Procurement: Sourcing equipment and services
Why it matters
By breaking down operations into these components, businesses can better understand where they’re excelling and where inefficiencies, duplication, or missed opportunities may lie. The value chain framework provides a structured way to improve performance, reduce waste, and boost competitiveness.
It’s not just about the bottom line
While the value chain is often used to improve efficiency and cut costs, its value goes well beyond financial metrics:
Customer experience: Streamlined processes lead to faster delivery, fewer errors, and better service.
Innovation: Detailed analysis of business activities can reveal new opportunities to differentiate and evolve.
Resilience: A clear view of operations helps businesses adapt to disruption more quickly.
Sustainability: Optimizing each step of the value chain can lower environmental impact and meet ESG goals.
When used strategically, the value chain becomes a tool to deliver value to everyone, customers, employees, partners, and shareholders alike.
Want to take it a step further?
Understanding the value chain is the first step. The next is to map it, visually breaking down your business processes to identify where improvements can be made.
Want to learn more? Read our blog on value chain optimization to drive growth, innovation, and competitive advantage.
Unlock your value chain’s potential with ASEA
Ready to take your value chain from an operational necessity to a strategic powerhouse?
Book a strategic consultation with us today to find out how we can help you optimize your value chain and transform your operations.
- Identify high-impact opportunities across the value chain
- Implement lean, data-driven process improvements
- Build resilient supply networks and agile operations
- Equip leadership teams with insights to sustain performance