Page 108 - E1 Integrated Workbook STUDENT 2018

Chapter 8

1.3 Porter’s value chain

 The value chain model is based around activities rather than traditional
functional departments.

 It considers the activities that add value and drive costs and therefore the
organisation should focus on improving those activities.

 The activities are split into:

– primary ones (the customer interacts with these and can ‘see’ the value
being created) and

– secondary (or support) activities which support the primary activities.

 Margin, i.e. profit will be achieved if the customer is willing to pay more for the
product/ service than the sum of all the activities in the value chain.

Support activities Support activities
Firm infrastructure
Firm infrastructure

Technology development
Technology development
Human resource management
Human resource management
Procurem MARGIN
Procurementent

Inbound Outbound Marketing
Outbound
Inbound
Marketing
Service ice
Operations
logistics
and sales
logistics
logistics Operations logistics and sales Serv

Primary activities
Primary activities

Illustrations and further practice

Now try TYU 2 from Chapter 8.

Read illustration 2 from Chapter 8.

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