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Methods and concepts for Value Based Management (VBM)

Value Chain

The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.

Inbound Logistics
Includes receiving, storing, inventory control, transportation scheduling.

Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product.

Outbound Logistics
The activities required to get the finished product to the customers: warehousing, order fulfillment, transportation, distribution management.

Value Chain model of Michael Porter: Marketing and Sales
The activities associated with getting buyers to purchase the product including channel selection, advertising, promotion, selling, pricing, retail management, etc.

The activities that maintain and enhance the product's value, including customer support, repair services, installation, training, spare parts management, upgrading, etc.

Procurement of raw materials, servicing, spare parts, buildings, machines, etc.

Technology Development
Includes technology development to support the value chain activities, such as Research and Development, Process automation, design, redesign.

Value Chain model of Michael Porter: Human Resource Management
The activities associated with recruiting, development (education), retention and compensation of employees and managers.

Firm Infrastructure
Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc.

From a Value Based Management point of view, the Value Chain Framework helps to build a relative competitive advantage, together with Porter's Competitive Advantage thinking. The Value Chain Framework can be seen as one of two dimensions in maximizing corporate value creation. The other value creation dimension is the Market/Industry Attractiveness for which another model from Porter is often used: the Competitive Forces model.