Michael Porter's Value Chain Model?

The "value chain analysis method" proposed by Michael Porter, a famous strategist at Harvard Business School (as shown below) divides the activities with increasing internal and external value into basic activities and support activities, and the basic activities involve enterprise production, sales, feed logistics, delivery logistics and after-sales service. Support activities involve personnel, finance, planning, research and development, procurement, etc. Basic activities and auxiliary activities constitute the value chain of enterprises. In the value activities in which different enterprises participate, not every link creates value. In fact, only some specific value activities can really create value. These truly value-creating commercial activities are "strategic links" in the value chain. The competitive advantage that enterprises want to maintain is actually the advantage of enterprises in some specific strategic links of the value chain. Using the analysis method of value chain to determine the core competitiveness requires enterprises to pay close attention to the resources of the organization and pay special attention to and cultivate the important core competitiveness of key links in the value chain, so as to form and consolidate the competitive advantage of enterprises in the industry. The advantages of enterprises can come from the adjustment of market scope involved in value activities, and also from the optimization benefits brought by the coordination or sharing of value chains among enterprises.

The value chain lists the total value, including value activities and profits. Value activities are activities that enterprises engage in with clear boundaries in material and technology, and these activities are the cornerstone for enterprises to create valuable products for buyers. Profit is the difference between the total value and the total cost of various value activities.

Value activities are divided into two categories: basic activities and supportive activities. Basic activities are all kinds of activities involving the material creation and sales of products, the transfer of buyers and after-sales service. Support activities are auxiliary basic activities, which support basic activities by providing procurement input, technology, human resources and various company-wide functions.

[Editor] In any industry, there are five basic competitive activities.

Feed logistics: various activities related to receiving, storage and distribution, such as raw material handling, warehousing, inventory control, vehicle scheduling and returning goods to suppliers.

Production activities: various activities related to transforming inputs into final product forms, such as processing, packaging, assembly, equipment maintenance, testing, etc.

Delivery logistics: various activities related to the concentration, storage and delivery of products to buyers, such as finished product inventory management, raw material processing, delivery vehicle scheduling, etc.

Sales: provide buyers with ways to buy products and guide buyers to buy various related activities, such as advertising, promotion, sales team, channel construction, etc.

Service: various activities related to providing services to increase or maintain product value, such as installation, maintenance, training, spare parts supply, etc.

[Editor] All kinds of supporting activities involved in any industry can be divided into four basic types.

Procurement: refers to the purchase of various inputs used in the enterprise value chain. Procurement includes not only the procurement of raw materials for production, but also the procurement related to support activities, such as the procurement of research and development equipment.

R&D: Every value activity contains technical elements, whether it is technical know-how, procedures or technologies embodied in process equipment.

Human resource management: including various activities such as recruitment, employment, training, development and salary of all kinds of personnel. Human resource management not only plays an auxiliary role in basic and supportive activities, but also supports the whole value chain.

Enterprise infrastructure: Enterprise infrastructure supports the enterprise's value chain.

The purpose of analyzing the enterprise value chain is to analyze which part of the company's operation can improve customer value or reduce production costs. For any value-added behavior, the key question is:

(1) Whether the cost can be reduced without changing the value (income);

(2) Whether it is possible to increase the value while keeping the cost unchanged;

(3) Whether the process investment can be reduced while keeping the cost-benefit unchanged; ;

(4) More importantly, whether the enterprise can realize 1, 2, 3 at the same time.

The framework of value chain is to decompose the chain from basic materials to end users into independent processes to understand the source of cost behavior and differences. By analyzing the cost, income and value of each process system, business departments can obtain cost differences and cumulative advantages.

The following figure shows the value chain of copier manufacturers.

Once the value chain is established, it will be very helpful to accurately analyze the added value of each link in the value chain. The application of value chain is not limited to enterprises. With the application and popularization of the Internet and the increasingly fierce competition, the trend of joint value chain alliance among enterprises is becoming more and more obvious. Enterprises pay more attention to the construction and development of their own core competence and develop a link in the whole value chain, such as R&D, production and logistics.

[Edit] Value chain consulting mode

The value chain consulting model is an improvement based on Porter. The value chain consulting model divides the operation and management of enterprises into three levels: decision-making, management and operation. The decision-making layer makes decisions on the business direction and resource allocation of the enterprise; Management mainly includes financial management, administration, human resources, information services and other functions, and is responsible for controlling the efficiency and cost of enterprises; The operation layer of an enterprise covers many links from procurement, production to sales and service. This level mainly reflects the value-added of all levels, and carries out accounting and control of income and expenses.