Elements – Rather than looking at departments or accounting cost types, Porter’s Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers. Using this viewpoint, Porter described a chain of activities common to all businesses, and he divided them into primary and support activities, as shown below.
- Inbound Logistics
- Outbound logistics
- Marketing and sales
- Procurement (purchasing)
- Human resource management
- Technological development
Using the chain
- Step 1 – Identify subactivities for each primary activity – Direct activities – Indirect activities – Quality assurance
- Step 2 – Identify subactivities for each support activity.
- Step 3 – Identify links
- Step 4 – Look for opportunities to increase value