Frameworks
Value chain
The activities a firm performs to create and deliver value.
Last reviewedWhat does Value chain mean?
Michael Porter's value chain (1985) splits a company's activities into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) and support activities (firm infrastructure, human resources, technology development and procurement). It shows where cost is incurred and where value, and advantage, is created. The wider chain from raw materials to the end customer, across many companies, is called the industry value chain or value system.
Where does it come up in case interview prep?
- Value chains and profit poolsLesson in How industries work: the toolkit
- Getting industry-aware fast: the 10-minute industry scanLesson in How industries work: the toolkit
- Issue trees and driver treesLesson in How to structure any problem
- How pharma, biotech and medtech workLesson in Pharma, biotech and medical devices
- Diagnosing a profit decline: the reference caseLesson in Profitability
- How healthcare systems work: patients, providers and payersLesson in Healthcare providers and payers
- Structured brainstorming, and ranking the ideasLesson in Brainstorming and creativity
- How retail works and makes moneyLesson in Retail
- Value chainFramework: how to use it in a case
Related terms
- Vertical integrationOwning more stages of your own supply chain.
- CostWhat it takes to make and sell the product in a period.
- FrameworkA reusable way to break down a common kind of problem.
- Porter's Five ForcesFive pressures that shape how profitable an industry is.
- Porter's generic strategiesCompete on lowest cost, on being different, or by focusing on a niche.
- BCG growth-share matrixSorting businesses by market growth and relative market share.
- Ansoff matrixFour growth routes: existing or new products in existing or new markets.
- McKinsey 7S frameworkSeven parts of an organization that must fit together.