The Value Chain Model is one of the most powerful and unique tools for management. It involves considering a manufacturing company in terms of five separate but interdependent activities: research and development (R&D), marketing and sales, production, order processing, and the logistic function, plus service.
By creating a value chain analysis template, owners can now visualize their company’s activities under each category. This will provide them with a much clearer picture of their business as a whole and how individual activities contribute to its overall operations. Undertaking a value chain analysis exercise every quarter or every year helps companies identify areas that need improvement, especially those that they normally take for granted.
Table of Contents
Value Chain Analysis Templates
Gain valuable insights into your business operations and identify areas of competitive advantage with our comprehensive collection of Value Chain Analysis Templates. Value chain analysis is a strategic tool that helps businesses understand and analyze the activities and processes that create value for their customers. Our customizable and printable templates provide a structured framework for conducting a thorough value chain analysis, including primary activities such as inbound logistics, operations, outbound logistics, marketing and sales, and customer service, as well as support activities like procurement, technology development, human resources, and infrastructure.
By utilizing our Value Chain Analysis Templates, you can assess each activity’s cost and value contribution, identify opportunities for cost reduction or differentiation, and make informed decisions to enhance overall business performance. With visually appealing designs and user-friendly layouts, our templates make it easier to visualize and communicate your value chain analysis findings. Streamline your strategic planning, optimize your value chain, and gain a competitive edge with our user-friendly templates. Download now and unlock the power of value chain analysis in your business strategy.
What is a value chain analysis?
Value chain analysis is a working template in which the departments profile and draw the operation between them for the company to recognize itself and its structuring. We can use the value chain analysis template to distinguish between priority and supporting departments when profiling the company/department.
Why is value chain analysis important?
The value chain refers to the set of activities that a business coordinates to satisfy the needs of its customers and refers to the value creation process that extends from suppliers to production, marketing, and distribution.
Each stage or link of the value chain is associated with other links and aims to add more value to the product at every stage, based on customer needs-oriented thinking. In other words, it should aim to provide a competitive advantage to every link in the value chain. It should aim to achieve either lower cost or higher quality or differentiation at each stage compared to that of competitors.
In this context, the value chain is a good analysis tool to reveal the contribution of each activity (procurement, marketing, etc.) to create a competitive advantage.
Value chain, in doing each activity by providing the opportunity to examine each activity in the value creation chain one by one,
See how successful or unsuccessful we are (to what extent we have increased the margin of value) compared to our competitors,
To reveal the relationship of each activity with the previous and next and all activities,
Which activities to perform within the business, which ones to purchase,
Based on which ring of the value chain our outstanding success is based on, we can start new areas, new products, etc. It will help us decide which direction to go.
The History and Evolution of the Chain Value
When we come from the 1990s to the 2000s, internationalization has become more known worldwide and has been applied more in practice by companies. However, the value chain concept has also increasingly moved from home to abroad. To increase their productivity and optimize their profitability, companies have turned to work with experts from different corners of the world in R&D, design, production, and even marketing and branding activities, especially in parallel with technological developments and the spread of the internet.
The trained human resources in the developing countries has started to make a name for itself in the world arena. Thus, while developing countries prepare for more important roles in international trade by providing additional income and accelerating their development, developed countries have achieved a cost advantage and have become more competitive in domestic and foreign markets. Therefore, the concept of a value chain has created a win-win example for all interested parties.
Porter’s Value Chain Analysis
Michael Porter of Harvard business school wrote the book “Competitive Advantage: Creating and Sustaining Outstanding Performance” which introduces value chains in commerce. In the book, “Competitive advantage cannot be understood by looking at a firm as a whole. It arises from the many separate activities that a firm performs in designing, manufacturing, marketing, delivering, and supporting its product. The value of the business is important in every way.
Michael Porter’s value chain concept has two main branches and supports activities.
Primary Activities and Support Activities
Primary activities help companies rise above the competition with these five elements:
- Functions include inbound logistics, material receiving, warehousing procedures, and inventory management.
- Processes are processes of converting raw materials into a product.
- Outbound logistics is the distribution to customers.
- Marketing and sales expand the exposure of a product or service to consumers through advertisements, promotions, and pricing.
- Service includes maintenance, repair, return, and replacement of products and customer service.
Support activities are like helping primary activities, hence called support activities. Companies also treat them as overhead expenses on an income statement.
Procurement is the Raw Material Acquisition Method.
Technological development is more in the direction of research and development where production techniques and automation processes are available.
Human resources evaluate individuals and whether they have the potential to help the company. HR managers are responsible for hiring employees.
Infrastructure is the company systems and management team combinations such as accounting, finance, planning, and quality control.
- These are examples that follow a value chain:
- Products are products that we can physically touch.
- Services are more than items with intangible value.
The software can scale without users paying for expensive software installations, data centers, and hardware. It has a cloud platform host that allows it to access the software. Value chains are more about technology and a little bit more about marketing and customer service. They sell verbally or using large global sales teams.
How to Perform a Value Chain Analysis
- Identify Value Chain Activities
The first step in conducting a value chain analysis is to understand all the primary and secondary activities that create your product or service. If your company sells multiple products or services, it’s important to do this for each.
- Determine the Cost and Value of Activities
After the primary and secondary activities have been identified, the next step is to determine the value that each activity adds to the process and the associated costs.
When thinking about the value created by the activities, ask yourself: How does each increase end-user satisfaction or enjoyment? How does it create value for my company? For example, does creating the product from certain materials make it more durable or luxurious for the wearer? Does incorporating a particular feature increase the likelihood that your firm will benefit from network effects and increased business?
Similarly, it is important to understand the costs associated with each step in the process. Depending on your situation, you may find that reducing expenses is an easy way to improve the value provided by each transaction.
- Identify Competitive Advantage Opportunities
Once you have compiled your value chain and understood the cost and value associated with each step, you can analyze it in terms of the competitive advantage you are trying to achieve.
For example, if your primary goal is to reduce your firm’s costs, you should evaluate each part of your value chain through a cost reduction lens. Which steps might be more efficient? Is there anything that does not create significant value and can be outsourced or eliminated to reduce costs significantly?
Similarly, if your primary goal is product differentiation, which parts of your value chain offer the best opportunity to achieve this goal? Does the value creation justify the investment of additional resources?
Using value chain analysis, you can uncover many opportunities for your company that are difficult to prioritize. That’s why it’s often best to start with demanding improvements but deliver the highest return on investment.
What is an example of a value chain analysis?
An example is analyzing the value chain for a fast food company. The key activities examined would include food suppliers, inventory management, order taking, food preparation, drive-thru pickup, and customer service. Recommendations may focus on supplier relationships, kitchen efficiency, worker training, packaging, and waste reduction.
How do you create a value chain model?
Create a flow chart listing key company activities. Organize activities into primary and support groups. Use diagrams to map the relationships between activities. Identify where value is added, and where inefficiencies or waste exists. Outline analysis and recommendations based on the model.
How do you write a value chain analysis?
To write a value chain analysis:
- Identify the key activities in each step of the business process.
- Evaluate how they contribute value to the final product or service.
- Determine which activities drive competitive advantage.
- Assess the costs, resources, and capabilities for each activity.
- Identify potential improvements to increase efficiency.
- Recommend changes to maximize value.
What are the 5 primary activities of a value chain?
The 5 primary activities in a value chain are:
- Inbound Logistics
- Outbound Logistics
- Marketing and Sales