Roman Kurnovskii

Value Chain: Content, Elements, and Potential Uses

Roman M. Kurnovskii, Ekaterina A. Velikorodnaya

Economy and Entrepreneurship, No. 8, 2023, pp. 241-245

Abstract

The article examines the concept of the value chain as a tool for strategic analysis and planning. The authors analyze the content and elements of the value chain, as well as the possibilities for its practical use to increase the competitiveness of an enterprise. Special attention is paid to identifying non-productive activities and optimizing value creation processes for the end consumer.

Keywords: value chain, value creation, strategic planning, competitiveness, business processes.

Introduction

In the context of globalization and toughening competition in world markets, companies face the task of finding new ways to increase the efficiency of their activities. One of the most sought-after tools in this area is the concept of the "value chain," first proposed by Michael Porter. This concept allows viewing an organization's activities not as a set of disjointed functions, but as a system of interconnected processes aimed at creating value for the client.

Content and Elements of the Value Chain

According to the classic approach of M. Porter, the value chain consists of nine categories of activities, which are divided into primary and support activities.

Primary activities include:

  1. Inbound Logistics: Receiving, storing, and distributing resources.
  2. Operations (Production): Transforming resources into the final product.
  3. Outbound Logistics: Collecting, storing, and delivering the product to consumers.
  4. Marketing and Sales: Informing consumers and providing the opportunity to purchase.
  5. Service: Supporting the value of the product after the sale.

Support activities include:

  • Procurement: Purchasing resources.
  • Technology Development: R&D, automation, systems design.
  • Human Resource Management: Recruitment, training, and staff development.
  • Firm Infrastructure: General management, planning, finance, legal support.

Possibilities of Using the Value Chain

Chain analysis allows companies not only to understand their cost structure but also to identify sources of competitive advantage. There are several key directions for using this model:

  1. Cost Analysis: Allows determining which stages of product creation generate excessive costs and where savings can be achieved without loss of quality.
  2. Differentiation: Helps identify unique characteristics of a product or service that are valued by clients and strengthen them.
  3. Optimization of Links: Allows for improving interaction between various departments of the company, as well as with suppliers and partners.

In modern research, such as the works of Stabell (2008), alternative configurations of value creation are highlighted:

  • "Value Shop": creating value by solving individual customer problems (e.g., consulting or medicine).
  • "Value Network": creating value through mediation and connecting consumers (e.g., banking services or social networks).

Conclusion

Summarizing the above, we note that a systematic analysis of the value chain allows companies to identify areas for modernization and determine a set of actions that bring the most benefit to customers and the organization as a whole. By eliminating non-productive activities, companies can increase their competitiveness and improve profitability indicators in the long term.

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Published Aug 15, 2023 | Updated Aug 15, 2023