Accounting process 3 steps3/27/2023 ![]() ![]() Outbound logistics: Activities related to distribution, including packaging, sorting, and shipping.Operations: Activities related to turning raw materials and components into a finished product.Inbound logistics: Activities related to receiving, warehousing, and inventory management of source materials and components.Primary activities are those that go directly into the creation of a product or the execution of a service, including: Components of a Value ChainĪccording to Porter’s definition, all of the activities that make up a firm's value chain can be split into two categories that contribute to its margin: primary activities and support activities. Similarly, knowing how your firm creates value can enable you to develop a greater understanding of its competitive advantage. By maximizing the value created at each point in the chain, your company can be better positioned to share more value with customers while capturing a greater share for itself. Taking stock of the processes that comprise your company’s value chain can help you gain insight into what goes into each of its transactions. The concept was conceived by Harvard Business School Professor Michael Porter in his book The Competitive Advantage: Creating and Sustaining Superior Performance. A value chain can consist of multiple stages of a product or service’s lifecycle, including research and development, sales, and everything in between. ![]() The term value chain refers to the various business activities and processes involved in creating a product or performing a service. Below is a look at what a value chain is, why it’s important to understand, and steps you can take to conduct one and help your company create and retain more value from its sales.įree E-Book: How to Formulate a Successful Business StrategyĪccess your free e-book today. To evaluate how much value your company is creating, it’s critical to understand its value chain. Companies that generate greater value with each sale are better positioned to profit than those that produce less value. Successful businesses create value with each transaction-for their customers in the form of satisfaction and for themselves and their shareholders in the form of profit. ![]()
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